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78–665 2013

UNEMPLOYMENT CHECKS TO PAYCHECKS: 

IMPLEMENTING RECENT REFORMS 

HEARING 

BEFORE THE

SUBCOMMITTEE ON HUMAN RESOURCES 

OF THE

COMMITTEE ON WAYS AND MEANS 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

SECOND SESSION 

APRIL 25, 2012

Serial No. 112–HR12 

Printed for the use of the Committee on Ways and Means 

( 


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COMMITTEE ON WAYS AND MEANS 

DAVE CAMP, Michigan, Chairman 

WALLY HERGER, California 

SAM JOHNSON, Texas 

KEVIN BRADY, Texas 

PAUL RYAN, Wisconsin 

DEVIN NUNES, California 

PATRICK J. TIBERI, Ohio 

GEOFF DAVIS, Kentucky 

DAVID G. REICHERT, Washington 

CHARLES W. BOUSTANY, JR., Louisiana 

PETER J. ROSKAM, Illinois 

JIM GERLACH, Pennsylvania 

TOM PRICE, Georgia 

VERN BUCHANAN, Florida 

ADRIAN SMITH, Nebraska 

AARON SCHOCK, Illinois 

LYNN JENKINS, Kansas 

ERIK PAULSEN, Minnesota 

KENNY MARCHANT, Texas 

RICK BERG, North Dakota 

DIANE BLACK, Tennessee 

TOM REED, New York 

SANDER M. LEVIN, Michigan 

CHARLES B. RANGEL, New York 

FORTNEY PETE STARK, California 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

RICHARD E. NEAL, Massachusetts 

XAVIER BECERRA, California 

LLOYD DOGGETT, Texas 

MIKE THOMPSON, California 

JOHN B. LARSON, Connecticut 

EARL BLUMENAUER, Oregon 

RON KIND, Wisconsin 

BILL PASCRELL, JR., New Jersey 

SHELLEY BERKLEY, Nevada 

JOSEPH CROWLEY, New York 

JENNIFER M. SAFAVIAN, Staff Director and General Counsel 

JANICE MAYS, Minority Chief Counsel 

SUBCOMMITTEE ON HUMAN RESOURCES 

GEOFF DAVIS, Kentucky, Chairman 

ERIK PAULSEN, Minnesota 

RICK BERG, North Dakota 

TOM REED, New York 

TOM PRICE, Georgia 

DIANE BLACK, Tennessee 

CHARLES W. BOUSTANY, JR., Louisiana 

LLOYD DOGGETT, Texas 

JIM MCDERMOTT, Washington 

JOHN LEWIS, Georgia 

JOSEPH CROWLEY, New York 


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C O N T E N T S 

Page 

Advisory of April 25, 2012 announcing the hearing ............................................. 2 

WITNESSES 

Panel 1: 

The Honorable Jane Oates, Assistant Secretary, Employment and Training 

Administration, U.S. Department of Labor, Testimony .................................... 7 

Panel 2: 

Mr. Darrell Gates, Deputy Commissioner, New Hampshire Department of 

Employment Security, Testimony ....................................................................... 72 

Mr. Larry Temple, Executive Director, Texas Workforce Commission, Testimony ...................................................................................................................... 85 

Dr. Wayne Vroman, Ph.D., Senior Fellow, The Urban Institute, Testimony ..... 92 

Mr. Douglas J. Holmes, President, UWC—Strategic Services on Unemployment & Workers’ Compensation, Testimony ..................................................... 103 

Mr. Michael Cullen, Managing Director, OnPoint Technologies, Testimony ...... 115 

MEMBER SUBMISSIONS FOR THE RECORD 

The Honorable Tom Reed ........................................................................................ 134 

PUBLIC SUBMISSIONS FOR THE RECORD 

TrueBlue ................................................................................................................... 184

MEMBER QUESTIONS FOR THE RECORD 

The Honorable Geoff Davis ..................................................................................... 169 

The Honorable Jim McDermott .............................................................................. 179 


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(1) 

MOVING FROM UNEMPLOYMENT CHECKS TO 

PAYCHECKS: IMPLEMENTING RECENT 

REFORMS 

WEDNESDAY, APRIL 25, 2012 

U.S. HOUSE OF REPRESENTATIVES, COMMITTEE ON WAYS AND MEANS, WASHINGTON, DC. 

The subcommittee met, pursuant to call, at 10:08 a.m., in Room 

1100, Longworth House Office Building, the Honorable Geoff Davis 

[chairman of the subcommittee] presiding. 

[The advisory of the hearing follows:] 


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HEARING ADVISORY 

FROM THE COMMITTEE ON WAYS AND MEANS 

Chairman Davis Announces Hearing on Moving 

from Unemployment Checks to Paychecks: Implementing Recent Reforms 

Washington, April 25, 2012 

Congressman Geoff Davis (R–KY), Chairman of the Subcommittee on Human Resources of the Committee on Ways and Means, today announced that the Subcommittee will hold a hearing reviewing the implementation of the reforms to the 

unemployment insurance system contained in Public Law 112–96, The Middle Class 

Tax Relief and Job Creation Act of 2012. The hearing will take place on 

Wednesday, April 25, 2012, in 1100 Longworth House Office Building, beginning at 10:00 A.M. 

In view of the limited time available to hear witnesses, oral testimony at this 

hearing will be from invited witnesses only. Witnesses will include a representative 

of the U.S. Department of Labor (DOL) as well as other public and private sector 

experts on unemployment benefits and policies designed to promote reemployment. 

However, any individual or organization not scheduled for an oral appearance may 

submit a written statement for consideration by the Committee and for inclusion in 

the printed record of the hearing. 

BACKGROUND: 

In March 2012 (the most recent official data), the U.S. unemployment rate was 

8.2 percent, with 12.7 million individuals unemployed, of whom 5.3 million were 

long-term unemployed—defined as unemployed for 27 weeks of longer. As of the 

week ending March 24, 2012, approximately 6.8 million individuals were collecting 

State or Federal unemployment benefits. 

The Federal-State unemployment insurance (UI) program created by the Social 

Security Act of 1935, assists unemployed individuals by offering weekly unemployment benefit checks while they search for work. According to DOL, in order to be 

eligible for benefits, jobless workers must have a history of attachment to the workforce and must be able and available for work. 

As a result of a series of laws enacted since 2008 to provide additional Federal 

extended benefits, the maximum number of weeks of total unemployment benefits 

payable per person grew to a record 99 weeks, including up to 73 weeks of Federally-funded benefits. Since mid-2008, over $200 billion in Federal extended unemployment benefits have been authorized, with most supported by general revenues. 

As the number of weeks of unemployment benefits and total spending have 

grown, so have total payments made in error. According to DOL, improper payments 

of unemployment benefits reached record highs in 2011, with $13.7 billion paid in 

error or 12 percent of all payments. 

On February 22, 2012, the President signed P.L. 112–96, The Middle Class Tax 

Relief and Job Creation Act, which extended and reformed Federally-funded unemployment benefits under the Emergency Unemployment Compensation (EUC) program for the remainder of 2012. The reforms to the permanent program include creating job search requirements for Federal benefits, permitting States to have flexibility to promote pro-work reforms, allowing screening and testing of certain UI applicants for illegal drugs, requiring reemployment eligibility assessments for the 

long-term unemployed, and requiring States to recover prior overpayments of UI 

benefits. Prior to their enactment, these reforms were the topic of a previous Human 

Resources Subcommittee hearing on moving from unemployment checks to paychecks in October 2011. 


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Also under the law, the unemployment rate thresholds and weeks of benefits 

available in various ‘‘tiers’’ of EUC will change in the coming months, resulting in 

fewer weeks of Federal benefits being paid, with those weeks increasingly focused 

on States with the highest unemployment rates. As a result, starting in September 

2012, the maximum number of weeks of eligibility for UI benefits will have fallen 

from 99 weeks to 73 weeks, but only in States with unemployment rates above 9 

percent. 

In announcing the hearing, Chairman Davis said, ‘‘Members from both Chambers of Congress and both sides of the aisle came together to agree on new 

policies designed to help unemployed Americans return to work. This hearing will examine how these new reforms are being implemented by DOL 

and the States. This will help us judge what next steps may be needed to 

improve the overall integrity of the program so that we are better able to 

move more individuals from benefit checks to paychecks.’’ 

FOCUS OF THE HEARING: 

The hearing will focus on the implementation of reforms to unemployment benefits enacted in P.L. 112–96, The Middle Class Tax Relief and Job Creation Act. 

DETAILS FOR SUBMISSION OF WRITTEN COMMENTS: 

Please Note: Any person(s) and/or organization(s) wishing to submit for the hearing record must follow the appropriate link on the hearing page of the Committee 

website and complete the informational forms. From the Committee homepage, 

http://waysandmeans.house.gov, select ‘‘Hearings.’’ Select the hearing for which you 

would like to submit, and click on the link entitled, ‘‘Click here to provide a submission for the record.’’ Once you have followed the online instructions, submit all requested information. ATTACH your submission as a Word document, in compliance 

with the formatting requirements listed below, by the close of business on 

Wednesday, May 9, 2012. Finally, please note that due to the change in House 

mail policy, the U.S. Capitol Police will refuse sealed-package deliveries to all House 

Office Buildings. For questions, or if you encounter technical problems, please call 

(202) 225–1721 or (202) 225–3625. 

FORMATTING REQUIREMENTS: 

The Committee relies on electronic submissions for printing the official hearing 

record. As always, submissions will be included in the record according to the discretion of the Committee. The Committee will not alter the content of your submission, 

but we reserve the right to format it according to our guidelines. Any submission 

provided to the Committee by a witness, any supplementary materials submitted for 

the printed record, and any written comments in response to a request for written 

comments must conform to the guidelines listed below. Any submission or supplementary item not in compliance with these guidelines will not be printed, but will 

be maintained in the Committee files for review and use by the Committee. 

1. All submissions and supplementary materials must be provided in Word format and MUST 

NOT exceed a total of 10 pages, including attachments. Witnesses and submitters are advised 

that the Committee relies on electronic submissions for printing the official hearing record. 

2. Copies of whole documents submitted as exhibit material will not be accepted for printing. 

Instead, exhibit material should be referenced and quoted or paraphrased. All exhibit material 

not meeting these specifications will be maintained in the Committee files for review and use 

by the Committee. 

3. All submissions must include a list of all clients, persons and/or organizations on whose 

behalf the witness appears. A supplemental sheet must accompany each submission listing the 

name, company, address, telephone, and fax numbers of each witness. 

The Committee seeks to make its facilities accessible to persons with disabilities. 

If you are in need of special accommodations, please call 202–225–1721 or 202–226– 

3411 TTD/TTY in advance of the event (four business days notice is requested). 

Questions with regard to special accommodation needs in general (including availVerDate Mar 15 2010 08:09 Oct 28, 2013 Jkt 078665 PO 00000 Frm 00007 Fmt 6633 Sfmt 6621 I:\WAYS\OUT\78665.XXX 78665

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ability of Committee materials in alternative formats) may be directed to the Committee as noted above. 

Note: All Committee advisories and news releases are available on the World 

Wide Web at http://www.waysandmeans.house.gov

f 

/. 

Chairman DAVIS. Good morning. Thank you for joining us for 

the hearing this morning. 

As we all know, we have been paying record unemployment insurance benefits for years now. Despite characterizations by some 

that this is the best stimulus that money can buy, we know that 

the U.S. labor market remains in near critical condition today. 

There are 5 million fewer jobs today than the administration predicted there would be at the end of 2010. This is the slowest jobs 

recovery since data were first recorded in the 1930s. Unemployment has been above 8 percent for 37 consecutive months, the longest stretch since the Great Depression. Today’s 12.7 million unemployed Americans are almost 1 million more than when President 

Obama took office, and today’s 5.3 million long-term unemployed 

are more than double the number when President Obama took office. 

Yet even those grim figures miss some major problems. For example, beyond the 12.7 million unemployed and the 5.3 million 

long-term unemployed, millions more have simply stopped looking 

for a job. As this chart shows, the unemployment rate would be 11 

percent today if these discouraged workers were counted as officially unemployed. 

To address this desperate need to change direction, in February 

of 2012 Congress passed and the President signed into law legislation originating from this committee containing historic reforms to 

the Nation’s unemployment insurance system. When that legislation passed, the headlines often focused on how it extended Federal 

unemployment benefits through the end of the year with shortened 

durations and greater focus on the highest unemployment States. 

But the legislation contained much more, including what the administration described last week as the first major overhaul of the 

unemployment insurance system in decades. I would echo that sentiment. 

In sum, these reforms are designed to help more unemployed 

people, and especially more long-term unemployed, get back to 

work. Among other provisions the legislation includes new job 

search requirements for people collecting extended unemployment 

benefits, new waiver flexibility to test ways of using UI funds to 

help people get a job instead of just a benefit check, new reemployment assessments designed to address obstacles long-term unemployed have to taking a new job, and new authority for drug 

screening and testing of some UI applicants. 

The American people need these reforms to take effect quickly 

and to work effectively. This hearing is designed to review the implementation of these reforms as well as consider what additional 

steps may be needed. Members will hear from the Department of 

Labor as well as State and private sector experts about what these 

reforms are meant to accomplish, what has already happened, and 

what is yet to come in terms of their implementation. 


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We have some specific questions about how and why certain policies are being implemented the way they are, as well as about the 

challenges States and employers may have in adjusting to the reforms, but most importantly we use this hearing to ensure these 

changes are being implemented in a way that will help more unemployed Americans trade benefit checks for paychecks. That is our 

ultimate goal and the standard by which this program should and 

will be judged. 

I know that over time we have had spirited discussions on this, 

both in the committee, on the floor. Several of us who are up on 

the dais today have managed extensions of the previous unemployment program through the early period of the last Congress and 

the Congress before that, and we finally hit a center of mass where 

we were able to make some reforms, achieve a compromise with a 

focus on the process, getting away from the emotion of ideology on 

either end of the spectrum to really fix some problems that the 

States had, as well as addressing spending issues and incentives 

for folks to go back to work. 

So I appreciate all of you being here, appreciate the Members of 

the Subcommittee for joining us today. 

Chairman DAVIS. And one other note that I would like to make 

before we move on is I would like to take a moment to recognize 

Tim Ford, who is our Legislative Assistant on the Human Resources Committee, also helping to keep the trains running on time 

today. Tim has been with the subcommittee staff since early 2011, 

and he leaves us tomorrow for the University of Michigan law 

school. Tim does a lot of work before and during our hearings to 

make sure they run smoothly, and I know our witnesses are grateful for his help as they prepare to testify today. 

He is a great addition to our team. I personally appreciate his 

contribution, his infectious enthusiasm, and his devotion to duty on 

what can be a very intense subcommittee to work on. 

And I just want to thank you very much and all of us give you 

a round of applause for your contribution. 

[Applause.] 

Chairman DAVIS. With that, the ranking member, my friend 

from Texas, Mr. Doggett is recognized for 5 minutes. 

Mr. DOGGETT. Thank you, Mr. Chairman. 

Certainly extending a hand to those Americans who have lost a 

job through no fault of their own and who are out searching for 

new opportunities is the right thing to do to keep our economy 

moving forward and to assist millions of our fellow Americans. 

Unemployment benefits helped in a significant way to avoid a 

very bad recession, the worst since the Great Depression, from becoming a catastrophic depression by helping folks put food on the 

table, a roof over their family’s head, and get the kids the clothes 

they need to go to school. 

Overall our economy is making some progress as evidenced by 

the nearly 31⁄2 million jobs that have been created over the last 2 

years, but there is considerable work to do. And it is correct that 

since December of 2007, before this administration took office, we 

have, versus that point, 5 million fewer jobs. 

Though there has been some remarkably good news over time in 

Texas, according to the Center for Public Policy Priorities in East 


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Austin, we still have a shortfall in our State of almost three-quarters of a million jobs. In San Antonio, for example, almost 40,000 

workers are receiving unemployment benefits, and more than half 

of those have been unemployed for at least 6 months. In Travis 

County, almost 25,000 unemployed workers are claiming benefits. 

Last week the San Antonio Express-News held a job fair that attracted some 1,400 people, including Amanda, a 46-year-old trained 

as a medical assistant, who has been searching for a job for 6 

months without success. 

I think it is vital that we maintain the unemployment insurance 

lifeline for families who want to work, but have not yet been able 

to find a job. Fortunately, in February a number of our Republican 

colleagues, after a great deal of foot dragging and creating an unnecessary crisis for too many of our families, joined with us as 

Democrats in maintaining emergency unemployment benefits 

throughout the rest of 2012. 

There have been included with that new law as a part of the extension a number of reforms that are designed to promote employment. One of those was the subject of testimony in this subcommittee last year by Senator Ron Wyden of Oregon. I worked 

with Senator Wyden in sponsoring legislation to encourage more 

States to promote entrepreneurship among the unemployed by allowing under certain conditions those who are unemployed to use 

their resources to help establish small businesses. I think this is 

a program with much potential for some of the unemployed, and 

I look forward to hearing from the Secretary and others about how 

that potential can be achieved. 

The new law also contained provisions to avert layoffs through 

work-sharing programs in which individuals receive partial unemployment checks when their work hours are cut. The administration also had initiated a program that is included in the new law 

to require recipients of emergency unemployment to undertake reemployment assessments, and there are some demonstration 

projects that will be conducted by the Secretary of Labor to explore 

other alternatives, which we can discuss this morning. 

As we review how the States have responded to the various 

changes in Federal laws related to unemployment, we need to acknowledge that there is a much bigger challenge looming. Thirty 

States now owe the Federal Government $41 billion in unemployment loans, and several other State unemployment programs, like 

my home State of Texas, have borrowed from the private market. 

The magnitude of the recession had an obvious impact in driving 

up insolvency, but truthfully, a number of these States failed to 

make proper preparations for even a mild recession, much less a 

more severe one like that that we experienced. A system that was 

more forward funded would have averted many of the problems 

and certainly the massive amount of State debt to the Federal Government that we have today. 

I look forward to suggestions and recommendations as to how we 

can create an unemployment insurance system that does a better 

job of saving for the future and protecting those who need it in an 

economic downturn. 

Thank you, Mr. Chairman. 

Chairman DAVIS. Thank you, Mr. Doggett. 


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Chairman DAVIS. I would like to remind our witness to limit her 

oral statement to 5 minutes. However, without objection, all of the 

written testimony will be made part of the permanent record. 

On our first panel this morning we will be hearing from the Honorable Jane Oates, Assistant Secretary for the Employment and 

Training Administration, U.S. Department of Labor. 

Ms. Oates, please proceed with your testimony. 

STATEMENT OF THE HONORABLE JANE OATES, ASSISTANT 

SECRETARY, EMPLOYMENT AND TRAINING ADMINISTRATION, U.S. DEPARTMENT OF LABOR 

Ms. OATES. Good morning, Chairman Davis, Ranking Member 

Doggett, and other Members of the Subcommittee. Thank you for 

the invitation to testify today and for holding this hearing on the 

unemployment insurance provisions in the Middle Class Tax Relief 

and Job Creation Act of 2012. It is an exciting time for the UI program, and I welcome the opportunity to talk to you about what we 

are doing to implement these provisions. 

Let me first start by thanking Congress for extending the Emergency Unemployment Compensation Program and the full Federal 

funding for the Extended Benefit Program. We estimate that about 

5.3 million unemployed workers will receive more weeks of benefits 

as a result of this extension. Unfortunately, too many Americans 

are still unable to find work, particularly those that have experienced long-term unemployment. Therefore, both the extension of 

benefits and the provisions of these acts focusing on reemployment 

and layoff aversion are very important. 

My staff is rising to the challenge of having to implement multiple new initiatives at the same time, and we have made significant progress in developing the necessary guidance and providing 

technical assistance to States. I am also pleased to report that 

States are generally being successful in implementing the mandatory provisions of the act in very short timeframes, and NASWA, 

their association, has a lot to do with that. 

As you know, the act makes many complex changes to the EUC 

program structure. On March 5th, we issued initial guidance on 

the EUC changes, and we have additional guidance related to the 

random work-search audits and responses to State questions in the 

final stages. And to enable States to administer the new EUC provisions, Secretary Solis and all States signed addenda to their EUC 

agreements by March the 19th. 

The new provisions for providing reemployment services and eligibility assessments to claimants are an important step to ensure 

that long-term unemployed workers are getting the reemployment 

services they need to regain employment as soon as possible. Guidance was issued on implementation of RES and REA on March 

16th, a full week ahead of schedule, thanks to my great career 

staff. 

States have articulated a number of challenges related to implementation of RES/REA, but by far the biggest one is the need to 

increase their capacity to serve the additional 4 million EUC claimants they will be seeing through the end of the year. Despite these 

challenges, the States were able to commence RES/REAs by midVerDate Mar 15 2010 08:09 Oct 28, 2013 Jkt 078665 PO 00000 Frm 00011 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78665.XXX 78665

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April, most of them, and almost all States will have implemented 

by the first week of May. 

Secretary Solis is pleased to have the opportunity to promote innovative reemployment strategies by allowing up to 10 States to 

conduct demonstration projects. We know that States are excited 

about this new opportunity. UI PL 15–12 was issued on April 19th, 

providing guidance to the States on the application process, and 

many of the States will probably tell you they are still reading it. 

A Webinar to review the guidance and response to State questions 

is scheduled for this Friday. We welcome your staff and interested 

constituents to participate, and we will be happy to give you the 

information about how to get on that Webinar. 

We look forward to the opportunity to improve State take-up and 

expansion of short-term compensation as an important layoff-aversion tool. We began implementation of these provisions by consulting with stakeholders and other program experts in two listening sessions on March 19th and 20th. Guidance for all the shortterm compensation provisions and the model legislative language 

will be issued soon, and we are planning for robust technical assistance so that everyone who wants to can take advantage of that. 

We anticipate that States currently operating an STC program 

may have to make at least some State law modifications to conform 

to the new Federal program definition and to be eligible for the 

available grants. The 100 percent reimbursement of State STC benefit costs for States with permanent programs will begin soon after 

the guidance is issued. 

The self-employment assistance that the ranking member mentioned, the SEA provisions to support increased State implementation and to expand the program to both EUC and EB, will enable 

many more unemployed workers to consider self-employment as a 

reemployment strategy. Similar to STC, we hosted two listening 

sessions on March 19th and 20th and consulted with stakeholders 

and other program experts. 

While most of the UI provisions in the act are temporary, it also 

establishes some permanent changes to the UI program, including 

an explicit statutory requirement that regular UC claimants must 

be able to work, available for work, and actively seeking work. 

States will likely not need to make significant changes to their 

laws, as they already include such requirements. 

Other things on which we will be issuing a guidance, of course, 

are the changes permitting the permanent changes to include the 

provision allowing States to test certain applicants for the use of 

illegal drugs as a condition of eligibility. We are consulting with 

SAMHSA and with other agencies to make sure that our regulation 

concerning the occupations that regularly conduct drug testing are 

uniform across our agencies. 

I appreciate the opportunity to talk to you about the UI provisions. In the interest of time, I won’t talk about data exchange 

standardization, but please know we are very interested in that. 

We have already engaged with the Office of Management and 

Budget and our State partners to explore ways that we can expand 

that. You know we already bought into that. My career staff will 

be dancing in the aisle when we can do that. 

Chairman DAVIS. I would like to see that. 


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Ms. OATES. Right. 

And I would be remiss in my last few seconds if I didn’t say what 

a sad day for me to be testifying. We all lost a good friend when 

Don Payne lost his battle to cancer, and I know that some of you 

know that I spent some years in New Jersey. He was a great friend 

while I worked for Senator Kennedy and a terrific friend while I 

was in New Jersey. And I understand that members may be coming and going to go to his services, and I fully appreciate that, 

Chairman. 

Thank you. I look forward to your questions. 

Chairman DAVIS. I thank you very much, Madam Secretary. 

[The statement of Ms. Oates follows:] 


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wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.001

STATEMENTOF 

J ;\",' F; OAn:s 

ASSISTANT St:CRETA RY 

MI' LOl' I.:NT ANn TRAINING AO,'II,"II ISTR,\TION 

U_S. IlEI'ARn U:i\'" Of LAUOIt 

SEFOIt[ TH E 

SURCOMM rr n :t: ON IIUMAN KESOUKCES 

CO~ TTEE ON" WAl'SAND EANS 

UNITEI} ST,\ TES IIOUSE OF RE 'K SE ~TAT ES 

Al'rIl25. :20 II 

Uo,:.d momin!! CI13iml3n DJvi~. Ranking Member Doggc!i. and mcmbt.·", oflhl: Sulx:ummiltce. 

Thank }'ou f('>r Ihe inv,talion 10 leSlilY Iwa)' and fOr h(>lding Ih,s hearing On rhe n~mpl(>yl1\t"'l 

Insurance (Ull pnwisiCKIs in lh~ Middle Clas~T~ Rdicfand Job Cn::nl;on ACI of 2012 (Ih(' A(.1) . 

.... hich dlC'J1ds Ul lx:nclits for lonll-Ieon unemployed " 'orkcrs Jnd indudes 0 number of 

imponant UI refonns Ih~1 nUsn "ilh Ihe President"s prionliCl;. This is all c.xdting lime tOt the UI 

pl'Illlram and I welcome the opponunity to Inl~ 1('> you nooul .... hM we an: doing 10 implement 

lhe.e pl'Ilvisions. 

l eI me start by Ihanking Ihe Congn.'Ss Ilor c~lending Ihe Emergency Uncmploy,ncnl 

Compcno;al;on (EUCj program and ful l FLxicrall'unding fur Ihe E>;tcodexi [knclil (EA) progrnm. 

We L'!ilim~te rhal 'a!JQIII 5.3 millioo unel11pluycd wUfkl-rs will receive WOIl: wcch orbeneJits as a 

resuh of rhi ~ C~tcn {~l - be"efits that ore a crilical lifeline ror !hest' wQrkcrs as the ccononl~' 

Whil e our I:'CUOOll1Y is now gmwing nnd new job~ are being ,~.ued each Il\OOIIl. 100 Inan)' 

American worker!; ~re still un~bk!O lind wor~-pani~ularly th~ 5.3 million long-tmn 

unempillyl-d. Th~refon:. Ille prm'islOIlS in the Act IQcu~ing lin rL-enlpl oym~nt are p~rti cularly 

imponam. indudin); Self Entploynlelll Assistance (SEA). and Ih~ prol'ision of r ...... mploy numt 
11 


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,;erv ~es (RESJ and 1\'~l11plllyl11~nl and eJigil'lility a:lS~~~l11cnl~ (REAS) for !!UC duimanl!i. bOln 

ofwnich hnvc been Adlnillistrntiol1 priorities nnd werc propn...w in llle Amcri<:an Jobs Act In 

addition, the pnwisions encoumging stall"S to implement or expand short·time enm[ICIl5ll1ion 

(STC) prilgnlms will now provide an important new 1001 f,.". Slali!> In impltrm·nl layoff aversion 

slrn l~gl~~, hdping work~-n; 10 r~main "'mploycd and employ~rS II) rcl"in .~ illed workerS. Th~ 

opponunily for the SL'CfeIaryof Lab ... (S~rclaf) ) 10 enler imo a~n.-en,..nlS with ~Iaks Iv \loIh 

dL~nQIu;tr"'dle and e\,alu"le n~·w reemployment slrnl~gics will support =mploym~'l1 and provide 

all of us with evidence-based infonnatiOI1 10 infonn future U1 rdonns. 

'-'Iy stllTin th~ Omee of Un employ men I Insurn!)ee has b .. "n working dillgcnlly II> provid<.- Ih~ 

ne<;e~sary guid:rnce:rnd lechnic.1 assislance 10 Siaies 10 implement Ihc..e provi.iom; and we hav~ 

made signilica.u plugre$li in a vcry shon amounl oftimc. While subst~n jal work has be<:n dooe 

in all an"Js. we prioritin'd those ucas requiring immediate iJl1l'lemctllmion. Our early ocu~ 

W35 Iln issuing guidance and providing technical assistance UbQul the ELJC extension and the 

complex chan,!;.-s 10 th e EUe prtlgl'"Jm induding the RES/REA prllv silln~. which requirl,d 

guidance nnd Slate impkmeniationwililin 3lJ t\;Iys; consultation with sl~hhold 'ni und pmgr:lJll 

c~perts aboul STC ~nd SEA: and dcv~l(lping guidance on Ihe application protc,;, for the 

reemployment dcnl{'In.~111Ition PI"1~i."'ts . I ~m plea;;cd that I can report Ihul "'C have ac~oll1plishcd 

all ofthcsc early dclivel1lblcs and " 'e ~p«:tth01 additional guidance on the remaining 

pml'i,ions" inchlding the guidance 011 STC and SEA, und other reqUired lools, .uch 8~ the model 

l~gi,lali\ c lanKtlagc ti:tf both STC and SEA. will be issued wilhin Ihe nc~t sevcllll wcck~. MOlX' 

mfnrmmion aboul ~ath orlhe~ componenls and the other I·n::I~l cd provisions in the A~I art" 

jlfovidcd bclo" . 

, 
12 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.003

As )'Qu ~f\()W, implementing ~'''\1:I'!IIIWljor neW progTnm iniliali,e~ contum:ntly i,; a chaH~nging 

underta~ing for oolh IW, D~pan111cnl ofl.,aOOr (Department) nnd f(1< ~Iales. and there are a 

number of faCI(lfS Ihat ~an impact liming for impl~~,",ntation of "nch Oflhl!Sc' prol';siQrls. As an 

~~mpl", many oflhe provisions an.' reQuiring 11"'" financial and progrnmmalic prQCC:sscs, which, 

in tum trigger th~ net."d to (\(,·elup pa.:kal:!.es fur ckarnncc under Ihe Papi:rwor~ Rt"duclion A~I 

(PRA). Frol11 a .IIle pel"SptX:lil"c, a number ofPNv;s;ons requ;re O;lal~ law ch~ngcs. lim;l;n!! 

SI3ICS' ability to quickly imllklllcnl Ihem. In addilion. SlalCS necessarily havt had 10 focus in thc 

shon lem' Oil impicmcming mandatory EUC chan ilL'S. includinll Ihe ncw RES/REA 

I"<:quircnIO!l'C;;. and have nOI yel been able to give s;g,,;r,canl 'Ilcnlion 10 implememinl! the 

optional proyis;"ns. ! am plc:oo:d 10 report Ihal Slatcs arc gcncrnlly bcinJ!. 'cry succc'Ssfll\ 81 

implemcming the mandatory provisions and arc doing~o;n vcry short time windowi. 

lklow 1$ ~ l1Iore dctuilcd rc~iew of Mlr i111plCI1I~nu\linll Ofllw ,wio", UI provisions 'n Ihe Act, 

EXTENSIONS AND EUC CHANGES 

A~ you kllQw. Ul b<."11cfils are a cruci31lir .. hne fnr jobless WQfk~1':I. th.·ir familie,;. and IOC'~I 

eQmmunities. K~""pin!! Ihl!Se ~ncfilS avail3bl~ t() 10ng·I .. n11 un"mploy~d work~rs was 3 hil:!.,h 

prior;ly (ur Ihe Presidenl ,md. 3~~in. 1 appreciale Ihe sulx;ummil1l ... ~ ~fTurt~ to ~nsurc thaI Ihey 

Tm13in aVltilabk. 

The Act prol'idC"S "il~1 assislance to America's long·tcntl unemployed work<'rs by e.~tcndin)! tile 

RUe program and provi~iolls enablin!! Ell 10 ,.,;,main a,,"ilablc in smIts longc"". In addition ro 

Ihe actll~1 est ... uion of£UC benefilS, IheAClI1l>lde a number .~ig)liricam and c()l1Iple~ chan~<'S 

10 Ihe strlicture of tile program including changes tQ the numberofw""kJ; a''lIilable in the 4 lien 

ofb<:nefits a, well:lli Ih .. trigg~'fs fur St:ll<.'S to provide the '·arion'! lim ofben~r.IS. Th,',;o: 
13 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.004

strucwral chang<:s will reshape th~ prognlm ~, ery quaner untillhe progrnm ends completely, 

wililHO phnk' OIl!. Oil Junll~1)' 2, 2013. The cVlllplex;ty oflhese th~lIge!; ;6 ~ Challenge for SUlltS 

10 implelnenl. Each change will rcquir<:: new compul~r progrumming to impicment, SOlllcthilll! 

Ihal stnlcS wilh anliquated information t~hnology infmslnlelUI1l slTUUIe wilh, and will gcnCl1Itc 

signilicam \, or~load ,..,laled 10 Cu;;\Omcrcnll \"olum" duc 10 ~Iainmnls' diffiL~,hy undcrsl,\ndinll 

lilt Chang.,,; and ~s~ingAudlions aboul huw they impacllncm. Nonetheless. SlalL'S hav/." ocl'n 

w",king ""rrcmciy harJ to mrnply wilh all oflh" n~w EUe p!"llg ..... m n''luiremcn~, wnh 

particul~re",phasis. u) the stat<.'$ H,l ""hid, il alll''''''''' on makilll!: Ihe new 10 w<:'Ck ~ ofTi\... 4 

belle/ill; available as quie\:Jy as possible 10 C\igible unemp oy~d workers. 

The Act makes ~"er:l l OIher changes to Ih,' EUe program. First. it adds 8 new explkil 

r'<.'<.lui,..,mcnlthat individuals be able to work. available 10 wor\,;. and aclively !\l..:king wor~ . 

AClively ,~killg "oli; is defin~-d to indude rc~eslr:llion wilh Ihe employmenl ser.'ie". an 

apprOpriale !)Carch (,,' work. maintenance of~ work ~carch rccor<l and Ih~ pmvesion of such 

"",ord 10 \h~ Slate .geney upon ro!{jUCSl . Funhcr, the Aet rO!<1uircs Ihe Secretary 10 csmblish a 

m;ninulln numbt. ... ofclaim~ Slales mus] randomly audil each wtt~ to verify indi\'idualij ' work 

scuch c/Torts. In addilion, Ihc Act require!; Slales to recovcr improJ>l.'r EUe IX,ymems by 

Qffsell;nll a~~il\Sl bc:nefils p:r.yabl~ lO individuals. Finally, the Act modifies Ih~ EUe ~non· 

r..-duclion rule" t() <'xcludc Slat" <'nactJn~'I\): before March I. 2012 Ih3t would viulate Ihis rul<' by 

reducing u'"=g<' wrekly renefil amounts payabl~. 

Wilhin days \If ellaClmcnl. my slaffhad 8 tonfereoce call wilh Ih" SUlle UI ag~-nci~s tQ provide 

initia l II.'Chnic.1 a""isl8nce In facil itate ,laic effon.'10 ['mmplly im['lcm~-n1 Iii ... "", changes. On 

M,)rch 5,2012, Ihe IXpartmenl s~ucd guidance (UI PrugTllm L~Il~r 4_10, March 5, 2012 f 10 lhe 

slales aboul these progrnmmalic changes. The Sccr'<.1ary and all st~ll"s signed add"nd:llo thdr 

, 
14 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.005

Eue ~gr",,",enll; by Murch 19.2012. llwl c~'tajn Ille new required adtlil i\>1'~ III Ih~ !Otic 

pmgrtlm en~bljng ~1~t~ ~ 10 conlinu~ to oper;!l(' the program. Additi{}flal gui& e~ on 11K 

r~ujrcm~nL fQr siaies t<1 impkment work s~~h random audil!; will be i.,uM >ool[, We al!;() 

plan 10 is~uc roUi>W~Up guid~nce in a qucstiQ(l and ~IL~Wcr fom ... t to gddress spc..-:ific ;;tn t~ 

impl~mcmntiOll questions Ihul were IICt nddr¢.Ssed in the original guidance. 

RES/REA 

The prn\ ision~ in Ih" Act for ~empkrym;:1l\ ,;entin'S and ",igibillty a5Si:S'tnents for all nl"W EUe 

cI~;manls and ~"m:nt daimnnts \I ho transition toTi~r 2 <1fF.UC benefits is an imporlant Step to 

en$~re that IOllg-tenn une'!nploycd worker.; nre g~n ng the ~employm~nl :<ervites they need 1'1 

reg;lin employment fit th~ ~'lIrlicst possible lIJn<:. Thi~ blended apPffi,lch tQ providing 

l"1.'employmo:m ser--ice$ nod eligibility assessments help> reduce the dUOltiOll Qfbenefil re.:Clpl 

and saves un<:",ployment fund, by hl'lping d~imant~ find jobs faster and eliminating p,lymCnt:l 

tn iodigjblc individuals. We know Ih is is a Sirategy thnl worl;s. The result, of a ~Iudy Qfthc 

REA J11Ql!Jam by IMPAQ Imcm~lional conccming the Stale ()fN~"ada. which iflcludw a 

combined REA ru,d RES modd. ;;howed thnt ~ombining RES with REA!; increased 

rlX'mplQ~mcnt b~ cto;;e tQ 20 pc:rcelll inilinll~ and by close to 10 perccnl inlo the &c>:on,j year 

follQwing p;!nieipatinn in the prol!Jmn. Ur.c oflhis model ~16n ill~n:~r.ed eaming,& by 25 percent 

initiDily pnd close to 15 pc:fC~nl intQ Ille S<"Clllld year alier panicipatiQn. Thus. nQI Qnly did 

eligibility ru;:IeS.~mcnt and rc..-:mploymenl !.trvices haw R pNitil-e ~flecl on UI dUraliQn. but ~Iso 

a p.:rsi>tenl ttfttl nn ~lllplo~lllcnl and camings. This model ul~o resulted in larger savings 10 the 

UnclIlployment Tru6t Fund (UTF) Ihalllhc results rrom the OIher Slalt'S thai did 110t cQmbinc 

Ihes<: ["nclions. Claimants Who rtteil'cd REAs in Nevada r~'<:ci\'C<I. on nwmge. 2.96 fewer 
15 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.006

W~~$ ofbenefiU th~n imil~r claimant. , whieh tl'illlsi(,tcd tl) ~ r~utlion in henefit payouts of 

$~05 per clail1l~ nt, 

The Act makes 8"ic,patil~' in RES/REA 3Ctivities aud !)CIVic"" a condition of EUe clig;b;~ty , 

thoog/' panicipatioll m~y be waiwd under ccrt~;n lirniu:d clrcumMUOC<.'S, SIatc5 must: 

P!'()vid~ labor market and career infomlalion: 

Asscss individuals' skills: 

Give individuals an oriC1l1a lion to one-slop career cenler ~Cf\l Ct.'S; and 

Examine individualJ' work se8reh activitie,; Iu r~vi~w eligibility fM EU(,~ 

StUICS also hav~ Ilk' option to provide more intensive reemployment and tmining !>CfV;ces. 

The Act provide'S stnl(!!l with f'lnding for RES/REA 3Ctivitic~ 3t 585 p;::r f>i'rsOn &e ...... ..J, The 

!imding is flowin,B Ihrough tilher \hegtalc'" UI agency Or mploYl11~nt &e,,·icc ng:tncy, 01 the 

Gov(nl<l(s discretion, Slates wcre strougly eocoumge'<l 10 colilOOrotivcty c,lgagc tbe stale's UI 

agency. tbe .tatc's employment servicc and Workfurcc Investmenl Act agencil"'. locJI workforce 

boards, and OnlO-Slup Carccr CCtltl'fS ill planninll for UnplCIJlCnlaliotl. 

The Secretary W85 reqoired, by Slatut..::, to issoe guiwmce 01\ implemenlation ofRESIREA 

ac,;v;,ies- nOI loter tlmn 30 days after CflDClmenl (Mnreh 23, 2012) and Ihe guidance was Isslled 

011 March 16, 2012- se\'cn days in nd~ance Oflhi5 r~uiremcnt. To provide addilional techo;':al 

assistance 10 siales. we held s<:\'crai caH~ with ~tatcs and ho,;ted D wcbinar on March 2\. 2012. 10 

amplify ollr lluidanee. 

It has 0Ca1 a challenge for S13t~ 10 !"limp op to implcml'1Jtthc RES/REA requirell.lcnts quickly 

and to illcr;:asc m.'ccssary capacity IOservc ml addi!;ooa! 4 million EUe claimants Ihrou!.dl Ihc 
16 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.007

end nflhe yen<. In our guids~e. we in~lrutt he- SUlI~S tn contut indlVidu~ls hy Ihe third WNIt in 

their cbim S<.'ries and In .><:hcdulc in-[I<'rwn KEAfR£S by th~ xth we.::k in toeir claim !;erie~. 

I)a~e'tl on inl'Jrnt.:uion ('Oliccled IhrQugh the Employment and Trainin!! Admini~lrtl1io!l'~ 

Rrgional OffiL't'S. many Slal~ Wen: able to impl~nl,,"1 by mid·April and mOSI 'Hales will 

implemenl by the r,rsl week of May. 

I ,,(,\,,1<1 also n,)le Ihat we are in Ih~ pr('ICfSS ofimplcmcnling a SlnlC report;ng procc;s thaI will 

~l,pt"rc employmcnl and I\'lCnli(l!l O"I~,)mCS fix those sen·cd. ~t ll~ing e~isting rcpI'lrting 

PIm'CSSCS used for th~ employn,cnt scrvice. 

DEMONSTRA nON PROJr::CTS 

lclping.unemplny~d Ameritans lind ltoOOjoh~ is R tOp priority for the- Presido:lll, For this 

...... wn. we an: pl~~ed In ha"e the opportunilY to pmmole innovnti, ... ",elllploylncm ~trut"gjes, 

The Act provides thaI the Srcrelary m3Y I"-'T!llil up I.) 10 Stales IQ concl"e'1 d""HlnSlr3lion projects 

10 ,,~pedile the n...,mphrymem ofindi1'jd"als who are eligible fl>l' "unemployment compensmion 

uncle'r Ihe Stale law ()( uch Slale" or 10 improve Slate l'fT .. 'Cli1'e" .. ..,s in carrying oul "its SI<H~ law 

with respecllo f<...,mploym~nL" The !cQPC Or~la!c dCnUtnSlfalion proj""'15 i~ limittd to ~ubsidit'S 

fur i.1nployer-ptovidt't! tr3;n;ng lIl' ccrtain din'C\ disbur~mem;; 10 cmployt'TS who hire ;nd;vidu l~ 

n:cdving UI benefits. 

In order 10 CDri)' oul thes<: demonSlrnt,on prujN\S 'IDles m~)' rC<jucsI a 1I'~,, cro!'lwn 

n:quiremcnls in Fedcn,llaw, Among OIlIer Ihing>. Ihese waiver.; could permit a ~Ialc IQ usc 

funds from \he SI3Ie' ~ attoul1' in th~ Un~mpJoy'nl1" TM.l.II Funcl 10 ~upport Ihe dCl11onStriujon 

pmj<'1-'1. In r~ogni ;oll oflhe importance ofmainl&ining res~r\ es fOf Ihe paymenl of 

1 
17 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.008

ullemploynwm tPlnpen>utiu!l. Ihe deml>JI~lrnti<l!l projeclS may ~1I01 n:~uh in any iIlCrt':l~~ nel 

CQSt; tP Ihe SllIle's accou,,1 in Ihe Unemploymenl m~t Fund:' 

The A~t al,;" P<'rmits Slat<-... to u"'"' their UI dmini~tr~ti,,, giants to fund thL"'" demonStralion 

[>IUjLocts and L'Stahlisht'il additiooal rt.'quir.':nll·nts for st~ "-'S thai want to conduct Ihi's<: projetlS. 

including a st~t~ e\'alll~lion ufthei:lT"cts of the d~mon~lratiflll projecl on individual s~i lle,ds. 

ClImings. ond empillymcnt retention. All projc.:IS nlUSt la~t lor at leasl one year and end no late, 

than December 31. 2015. 

We know llial st:l1L'S ore ",cited about this new O]lllQrtullily. T 0 L~'sure that 'Iates U,ldL'I'Slaud Ihe 

...... quirernent; for an "prlic~tiO!l to be approved and Iha l .Il ~tatcs hnve the chalice llJ apply. 

S~c"'lary Soli~ scnt IcltL'I'S 10 Ihe g<>wmors to lei ttlcm know uflhe 'lI'port ulI.lty and lhal 

application guidance would Il't' fr;mhc9ming. Giwn that this oPl'onunil), is limited t" ()llly ten 

~Iates. the apphcation pn.ICl'SS is d<""ig,,~d to a llow th ... Secretary 10 idenlify strong d~mon~tration 

[>IUjLocts and \0 enSllre "" can ~,'alll~te the dTcctlv(:ncss ofthes.c n~" appr!>.1chd, U1!'L I S-12 

lI'as Issued On April 19. 20 12. An ~pplica"t "chinn to rev iew tM application procc.'iS is 

scheduled for April 27. 2012. In additiOn. the [kpartmcnt plan~ to Wnduct 8 national c,'ultiation 

orlhe cntirt iniliative, in additl"n \1' the indi~idl~ll stotc c"~hmtinns "ftheirown demonstration 

pmjecl~. 

SI1QRT· TIME COMPENSATION 

STC. ~o kl\own as lI'ork sharing. is 3 l~yolTa"en;ion ~trilt~£y thol enabll:'ll workers 10 n:lllain 

employed and employers to hold onll1lh~ir trl/.ined stalT during times ofredllccd busi"es~ 

acliviiy. E~p3"5ion ofSTC is a tOp priority fQl" !his Adminiltralion und we are hapl'Y to be in 
18 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.009

positlon toadvancl" ~lale implcm~ma!ion ofSTC progranu. While i! can be an eITec!ive layo!T 

u~~rsion ~Irat('gy in any «onomy. it is ~ p;lnicnlnrly imponanllool in a n,<:c~iol1. 

nc Act includes severnl STC-relal~-d f>'IJvision~. Firsl. it e<)di(ie5 aud "'ooifiClllhcdefinition Qf 

STC. which l'$.<Cl!\ially establishes jlIuj;nI'" requirel"o:n15. While lI\uel, Ofl11i5 definition is 

C<.)t)SislCIl1 wjl1, prior I~,,\ lhl'll:- art: sotne key dI31\gt'S includinl! l\I~inlenance ofheal1h ~nd 

r~ljrelllenl benef;ts lOr STC panicipanll'. Stales Ihal bad beeo openlling an STC program Illior ({.I 

cnaC\IIlCQlllflhc Act bave 1 ~ years II> amend \beir laws 10 eouronn 10 the ne" dcrmil;oll. 

To .. ncourllg~· Sillies In ~naCI state STC prQg!lIms and gi~ ~Imcs M incentive 10 promllle Ihe Uo'e 

ofSTC, the ActprflYide); for 100 ~rccm reimburs~menl llfSTC benel;1 Co.sl~ ['I<lid under ~Iale 

law fur up In 156 weeks (Ih ree years). Authority In provide Ihe~ rt:imbursemculS cndJ 3 ye~rli 

and 6 ml1nth~ aller Ihe d~le of enaClmcnl oflhe Act (Augu&1 22. 2015), 

In recollnil;llll of the faci dIm Slales lIIay wanl 10 Iry OUI an STC program before Ihey arc able III 

Ilel a Siale STC prog.ram cnael~t1. lhe /lci alS/.) l.'Slablishes a voluntary redcr~1 STC proJ!ram. 

Under Ihis pr0W"Jm. lhe Fcd('ra! govcmmcnl ,,"lluld pay all adminislrali~ e COStS and llne-half llr 

Ihe STC bem"I,1 CllSIS, and Ihc ~mplo)lCf panicipal;ng in STC "'ould pay Ihe OIher haJforlh~ 

STC bcni:tli ellSIS. Slales may plInicipllle in the Fetll"ra\ STC prug.ram for no more Ihan 1().4 

,,"eck~ llwo years, and aUlhority fur Ihis progrJm euds 2 years and \3 ',lOCks after lhl· date of 

C113elnt('m (May 24, ZOI4). 

To cn.~(lrc 510ICS have atic<.l"3Ic admini~lrnllw l"eS(lI)",cs to implem~m and rromOie STe. Ihc /lcl 

al;;o IlfTIvide;; fnr ju;;\ under SI 00 million in jI.TlInts 10 stale~ whn,;c permnnent STC la"·s m~tlhc 

new Fedcral ddioilin". SIDtCS mUSI submit gmnt appli~·tlliOI\~ nn laler IlInn Dc.:eml>cr J I, 201-t. 

StnlC;; mll;;\ usc 1/3 nflheir share for implemenlalion llr Imprnved Ildmini&ll'Jtiun oflh eir STC 
19 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.010

pmgram,. TII~ remaining 213 of'heir ~hare mUS! IJe u.oo for p"'''loting and ~llr<)lli"g employers 

in STC program~, 

To mc~t the f~'quireml""l 'U th~ Act 10 ~QlU;1I1t with sta);eholdcrs :lQd oIlier progrnm experts wIlb 

n:.:ard 10 tllOdcllcgislaliw lanl:ulI,g~, wchnical assi~wnce, and I't'por1ing rl'quircmcnl!;, arid 10 

inform ol(r cn'vru; 10 dl'lln guid:!!)cc l'n all oflht'Sc STC provisions, we beld tWQ listening 

:;css;ons l'O M~n:h 19 and 20, 2012, We ,re a"i\'cly worl.:ing <J\l guidance 10. all ufll'e STC 

provisions, but " -I.' priorili~cd !irsl issuing guid:mcc on Ibe new delinitiou ofSTC, speci~1 

IrJ!!silio'l provis;ot,s fOf Ihe 25 sl alCS ,um.~Jlly upcmling STC prognofllS, ~nd 100 p<..'f'CeOi 

n:i.rubursctncJlt QfSlaW STC benetil costs. We hope 10 iS5UI) il souo. WC:lmicipalc thai all SWI~ 

cum:nlly opcmlins an STC prograJD will h,vc 10 l1l~kc al least somc modificalions II.' coufono 10 

lite new d"!inilion. We have coordinaled extensively with the Dcpanmeul oflhe Trcawry to 

cslablisb Ihc processes llCCCS5ary lOr Ihcsc reiH)bu!")t'l1lcQ\S 10 occur :md anlicil"l'" lhallhcsc 

reimbursemcnts will be~in 10 be l1ladc.shOflI~ alkr tbe guidance is issued. Addiliunal guidance 

on Ihe ICl1lpor~ry Fedeml STC program and th~ STC J;r.lnt~ arc undcr developmenl and will be 

iSSl>l-d in Ihc ",,~r rutun:. We also ~re l"Stablishin!l a robUSI <Il'ln:~ch ,md tcchnical assislance 

slrJ!c!;y to suppon SlalC lake-up and implemcntmion. 

SELF EMPLOYMI:."NT ASSISTANCE 

Both a re~mploymem S!ral~!O' ~Ild ajob clemion S!mlegy, SEA helps unemployed individl",ls 

establish thl.'ir own business by providing Ihem with lemporary income support (in lieu of 

f<.';:l:ivil1g regular UC) and :ICCl"SS 10 C111repn:n"uriallm;ll;nll and iCrVices. Pn:viou~ ~tudies show 

Ih3t those whl' pllrticil"lt~ ill SEA progr~l1ls are 19 limes mOfe likely to remain sell~cmploy~d 

than tho~ "ho du nOlo 
20 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.011

TheAc( has (WU key SeA com(>Qnen(~, I'irs(. il c~pands SEA (II (he EB ~ntl eue pml:!'!Il11s. 

lndivirlu;Jls may r~~ive up 10 16 weeks of SEA plIyrnenl$ blIsed on EUe. lOB. 01' curnbined 

EUC/EB eligibility. Tbe\'t"quirement~ for th~se programs an' generally th~ sam~ us fW;\3(e 

SEA. 

SCCOntl. the Ac( pl'(widcs 535 million f<)r ~,an\.S to lllt C$lhat (,IflCmtc any SEA prtlgr:trn- a 

r~gul:u Sllltc SlOA pmgmm. an £B SEA program. or an EUe program_ Thc grant ~m!)unt i~ 

dClennincd by Irnmula allt] sl;lte'S should 5ubmit a r .... nt applie<ltiOIl no latcr than Juoc 30, 2013, 

Slates may re'{;c;\"e two S'';I ~nc for dcve\ul'l11cm. implementation. o r adminiSIr:ttion of an 

SEA pmgrurn; and une for prul11ot;on and enmllm~nt ofindividu .... ls in an SEA plUS':lIn. 

Sim;l:!r to the STC progr~m. we hos!<'d IWO li,lcn;ng Sl.'S~ion, \>1\ SEA on March 19 and 20, 2012 

10111 ..... >1 Ihe requin'mcnt; of the ACI 10 consult wilh sl<lkcholder.; and mhe'1 prollflm "'~P<'m. 

develOp model legislalive language fl>( Slat" usc, pmvide It'thn;cal a~SiSIJnCC, ind csI!blish stille 

rqxming re</u;n'mcrtl;. We c~pt'Ct 10 gct u;t1~nce <)n the SEA provis;lln.' to stales by early 

j\1~ . As requir..-tl by the Act. .... e have alrcruJy CliglIgI!d witll tile Sm~\I SUs;(\= Admin;strutiul1 

(SBA) and Ir~ plann;ng uutrea~h and (echnical :IS5i~tance 10 Slnt.!§ in partnl'l'sllip witll SSA. We 

have alw alr..ady bt:gun pl ~nning.ror the rCt[uir~'() ~\,lIllIat;lln ufth,· progmm. 

PERMANENT UI LA W OIANGES 

While ,nany Qfthe rmvisiQn~ oflhe A~I de.>crib.:d al)Qvl' an:: 1<'mpQrttry. ;1 also l"litablish~ ... a few 

pcrmmt~n! law dlHnllCS with rcspec! to Ihe U] progr:tm. Fin;t. it add. an e.\pli,·il SI,HUIOI)' 

r'"(Juircmcnt that ind;vidu~l. musl ~ able IQ wort. avail~bl~ for work. and lIcI;l'd) ~ding, WlJ1'k 

in order '0 !It. elig;ble for regular UC. AS being "able and a\'~iI3b lc " for wuri: is 8 10nllSl~tlllinl1-

interpt'Ctation of FCdemllaw thJ! has b!:en eooiJlcd;11 Fl"dcral r.:gu ialilln. all States currently 

" 
21 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.012

require inJi"idunls 10 InCClIhis requirement as ~ cOl\dition ofeligibi!ity for ~netits, We arc 

eum:mly revkwing Ihe existing rcglllntiol1t<J d,'!cm1ine if there is any need tn ~mcnd it 10 ~\ig1l 

with tht pmv;sion in th~ A~t. for yt'mT rekrence. all states ~Ilrrentl)' require individuals to 

aClivdy s<...::k ",(lr , so th~re should be lillie or no opemtional chlmge to current practice. 

In nddition. the Act mnnd~h!S tllat S1lItcs =m'er impl"Opcr benefit pnymcllts via o!"lkt fr(lIll 

cum:nt bendit entitlement under ~ny stBle und Fctlem\ unclnploymcnt compens[llion ix'ncfit 

programs. Under prior law. sIDtes had penllission to re.:owr improper bend;'t payments via 

T~t rrom current benefit entitlement alld 311 States do thal In cslendHf year 201 1. stA t(>:; 

r,-.;o\'ercd mo~ th3n $-140.2 mill iOIl ,,13 Iheseo r:;et~. 

The Act nlso includl"S n pro\'isirnl concerning drug testing. II permit> ~1lIte \ to ti.'51 applicmll~ for 

usc orlllcgal drllgs undcreertain circumstnnNs as a rondition of eligibility for tJ.:onctit"" 

SfJ<..'i:ifically, this auth.:lr(ty is limit(..! to:! twl"l reasons directly rc!a ~>J tilth~ '·Fact CIr eau~" oFan 

i!.ldi",dual·~ uncnJP oym~'fI\; 

Th .. 3pplirnnt WitS t~mtin~tcd from employment with th.-ir mQSt rtt~nt employer fur 

unlawful use uf drugs, or 

The only w\"k that i$ suiral}k For Ihe individual i~;n an ''l:cupat;on that regularly 

conducts drug tl.'5\inl\. 

Pulicy guidanl't: ul1this is under dcvcl<l1?ml111. The Act also requires the Sl~1\. lU)' to issue a 

regulation c(lfIccming the Qo.:Cu l)aliuns that regularly cunduct drug testing. We arc con~ult ing 

with the Substance Abuse and Melllni tleahh Adminim"lliion in tb .. lkpartlnent ofl teallh and 

Human Servic.:s and mllers to d.:·velop nn approoeh to identifying thes .. occuilinions Ihnt 

regularly r~"<Iuirc drug tc,ting as a pre1,,"" to dCI'elopiug the TI.'q"ired T<:!!ul:nion. 
22 

f 

Chairman DAVIS. I move now to questions. I have a question for 

you first as we move forward. Your written testimony on page 6 

notes, and I quote, ‘‘The Secretary was required, by statute, to 

issue guidance on implementation of RES/REA activities not later 

than 30 days after enactment.’’ 


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23 

To my knowledge there was not a similar requirement for the 

Secretary to issue guidance on waivers. Is that correct? And, if so, 

why did DOL issue its recent guidance on waivers? 

Ms. OATES. On the demo project, sir? 

Chairman DAVIS. Yes. 

Ms. OATES. We did the guidance on that so that we could make 

sure—since this was a pilot and demo that the Secretary was very 

interested in pursuing and very happy that Congress gave her the 

opportunity to do, we wanted to make sure that we had some 

standardized process so that States would know exactly what we 

were looking for. And while I think some people will say, and I respect their opinion, that the guidance is lengthy, we think that this 

was—this is the first time that we have allowed States to use trust 

fund money for anything else other than the payment of UI benefits, and therefore it was important for us in good public policy to 

make sure that we told people what we were looking for in that. 

Chairman DAVIS. Our review of the Secretary’s guidance reveals 

little additional information about how the States are supposed to 

apply, except for the section labeled ‘‘The Secretary’s Priorities,’’ 

and this section includes a number of provisions that, in effect, 

were part of the President’s American Jobs Act, but not the bill 

passed by the Congress. And that includes new provisions related 

to the Fair Labor Standards Act, assurances that demonstrations 

lead to permanent employment, and goals involving low-income 

and older workers. Where exactly in the law Congress passed did 

these and other Secretary’s priorities for the waiver provision appear? 

Ms. OATES. Well, in the guidance, sir, we did provide all the 

statutory provisions that are mandatory, and the Secretary’s priorities were included as additional things. Yes, many of them were 

included in the President’s program that he put forward, but I 

think that the fact that we are using State trust fund money, that 

the businesses that are the sole providers of that money would 

want to make sure that raiding the trust basically resulted in permanent employment and did follow the Fair Labor Standards Act 

that was passed by Congress. So, I mean, I am not quite sure why 

we wouldn’t have said that. We don’t want temporary workers 

going in and displacing other workers, and the Fair Labor Standards Act is something that, quite frankly, businesses and States 

are used to already. We didn’t add anything that was new or complicated that they are not already working under. 

Chairman DAVIS. Well, I’ll just take this one step further. The 

President’s bill actually was never enacted, and there is reflection 

of those priorities in the new rules, and if the law Congress passed 

and the President signed didn’t include such requirements, why 

does DOL think that it can include them in the State waiver applications? I mean, coming back to the baseline legislation. 

Ms. OATES. Sure. I think that Congress gave the Secretary the 

discretion to add additional components, and the fact that the Secretary even—Congress, as Members of Congress, you gave her the 

discretion to do this program or not do this program. It wasn’t 

mandatory. So I think in choosing what was in the final guidance, 

we did choose to follow laws that had been passed by previous Congresses, like the Fair Labor Standards Act. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
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Chairman DAVIS. If State applications do not include these ‘‘Secretary’s priorities,’’ will that be held against their application and 

result in it being rejected? 

Ms. OATES. Well, quite frankly, like everything else we do, the 

guidance that we put out, whether it is a grant or a demonstration 

project like this, State applications will be weighted against their 

ability to meet the standards set in the guidance. So it would be 

premature for me to tell you what the Secretary will or will not dismiss. The process that we have developed has the Secretary only 

in the final stages, so therefore career people will be engaged in 

weighing State applications against what was in the guidance. So 

I would encourage States to follow the guidance as closely as they 

could so that their application could be seen favorably. 

Chairman DAVIS. I think this is bringing me back to one final 

point, and this really questions positional authority regarding what 

was enacted versus some of the additional, let’s say, interpretations 

that added legislation that was not enacted into it. 

Coming back to the core legislation that the Congress passed and 

the President signed into law, what is your authority for rejecting 

State waiver applications that satisfy the statute quite clearly, but 

not the additional requirements that were tacked on by the Secretary? And I think there is a question of prerogative and balance 

of law that the States, I think, certainly have a right to redress or 

ask. So if you could just quickly answer that question. 

Ms. OATES. Yeah, I think, Mr. Chairman, quite frankly, oftentimes we go and give further guidance when laws are passed. We 

do it through regulation, and we do it through guidance like this. 

I don’t think anyone in our solicitor’s office thought that we were 

doing anything unusual with this guidance. 

So with great respect, you know, happy to work with you as we 

get applications and the Secretary makes decisions, and we are 

open to your opinions and possibly the option that we would differ 

with you on the interpretation. 

Chairman DAVIS. Yeah. Well, just in closing then what I would 

appreciate is if your office would answer us from your counsel, explaining the addition of or interpretation of rules that are outside 

the scope of the original legislation. 

Ms. OATES. I am happy to do that, sir. 

Chairman DAVIS. Great. Thank you. 

Chairman DAVIS. With that, I would like to yield to my friend 

Mr. Doggett from Texas. 

Mr. DOGGETT. Thank you, Mr. Chairman. And thank you, 

Madam Secretary. 

In fact, the legislation we are referring to is permissive with reference to these demonstration projects. It does not mandate the 

Secretary to set up any demonstration project. It uses the term 

‘‘may’’; does it not? 

Ms. OATES. That is correct, sir. 

Mr. DOGGETT. And as I understand these other requirements 

that are not specified in the statute, one of the most basic ones is 

that in setting up these programs, these demonstration programs, 

and looking at whether you will grant waiver authority, you expect 

there to be compliance with other Federal statutes. 

Ms. OATES. That is correct, sir. 


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Mr. DOGGETT. Such as the minimum wage, such as not going 

back to child labor and working excessive hours without being paid 

overtime. Those would be the kind of requirements that I am sure 

that there are some still in this Congress that are as ideologically 

opposed to them as when they were first enacted into law decades 

ago, but you seek to assure compliance with Federal statutes; is 

that right? 

Ms. OATES. That is correct, sir. 

Mr. DOGGETT. And with reference to those demonstration 

projects, there will be some testimony shortly that what the Department has done is overly bureaucratic and administratively 

cumbersome. 

Can you tell us why certain requirements are imposed on the 

States wanting to use unemployment insurance funds to administer these programs, and weren’t some of these requirements, such 

as cost neutrality, requiring work to be suitable, and including a 

rigorous evaluation, already included in the statute; and don’t some 

of them, such as not using new programs to cause more unemployment with temporary workers replacing people who have not been 

unemployed, consistent with the goals of this legislation? 

Ms. OATES. That is correct, sir. Again, since this is the first 

time in history that the Federal Government has given States the 

permission to go into their State trust fund for anything else other 

than the payment of benefits, we took this very seriously. 

Additionally, we are hoping to get great innovative measures, 

and if we don’t make those measures adhere to other Federal laws, 

then we are using these demos as a political football rather than 

using them as really instructive techniques in order to get us information to share with you to get permanent changes to the UI system. 

Mr. DOGGETT. You are trying to preserve the trust associated 

with trust fund monies, which, as I understand your testimony, 

have never previously been used for any purpose other than paying 

the unemployment insurance benefits that unemployed workers 

have relied upon when the Congress set this program up? 

Ms. OATES. That is correct, sir. 

Mr. DOGGETT. With reference to the self-employment programs, 

are there some States that, in order to participate in those programs and help someone who has been unemployed innovate, be an 

entrepreneur, set up a small business, that the States will have to 

change their laws? 

Ms. OATES. We firmly believe that some States are going to 

have to change their laws. As I am sure you are aware, there are 

nine States who currently allow it, but only six of them are active, 

actively using it right now. But we think that States will be able 

to make those changes in enough time, because you have been generous enough to give us enough time until 2015 to actually do this 

that those States will have time to do it. 

Mr. DOGGETT. You have noted in your written testimony that 

those six States that have used the program and the individuals 

that have participated in the programs have a much better success 

rate than others in actually staying employed and getting a small 

business, as risky as that is, under way and going. Can you tell us 

a little about the potential of these self-employment programs? 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
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Ms. OATES. Well, Congressman, we have done actual research 

following up in these States, and even if folks weren’t able to open 

their own business because of credit problems, you know, or things 

that they couldn’t get right then and there, these programs are five 

times more likely to get a job and keep it. 

And so the lessons they learn in these entrepreneurship activities really make them a better candidate for another employer. 

They understand all aspects of a business. So we think it is a winwin. We think it would be great if they could get their own business up and going, but we definitely think this gives them a leg 

up in competing for jobs that would be available in their local area. 

Mr. DOGGETT. Madam Secretary, at a time when we have made 

significant economic progress, but still have a good ways to go to 

get the unemployment rate down, what is the effect of seeing 

major, substantial cuts in training and job-training programs 

across the country? 

Ms. OATES. Well, certainly, sir, I have a bias here, but I think 

this committee, in crafting the REA/RES provision that is now 

mandatory for States, it is going to be really a shell game for our 

constituents, mine and yours, if we gut the workforce programs so 

that when people go to get those reemployment activities, the services that they have been promised, there is no one there or the onestop has closed up. 

So I hope that we are able to show you quickly the benefits of 

getting folks both the assessment and the services that they need 

quickly, and get them back into the employment ranks where they 

are adding to the tax revenue and not taking money from the UI 

trust anymore. But I think it will be really terrible for all of us if 

we pull the rug out from under these folks that have suffered 

enough. 

Mr. DOGGETT. Thank you so much. 

Chairman DAVIS. I thank the gentleman. 

The chair now recognizes the gentleman from Minnesota Mr. 

Paulsen for 5 minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

Madam Secretary, you also mentioned in your testimony on page 

4 actually about the program, EUC program, expiring coming up. 

It ends completely with no phase-out on January 2nd of 2013. And, 

of course, we are making progress on jobs, we are moving forward. 

You stated that as well, and that is our goal across the board up 

here. 

So my question is this: Does the administration believe that current economics and the job growth that exists right now is strong 

enough that the EUC program should not be extended past the 

deadline of its expiration coming up in January at the end of this 

year? 

Ms. OATES. Well, if I could say two things on that, Congressman. First, I think that we have all learned with this recession 

that predictions are likely not to be correct. So I don’t want to 

make a prediction, and I don’t think the administration has yet 

shared with me their opinion on whether or not to go for another 

extension or not. I think we are all trying to look at everything as 

the glass is half full, hoping that the economic situation will continue to improve. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
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But the other thing is really a plea for all of us to make sure 

that people understand this cliff in January. It is different than 

anything they have experienced since we have begun this in 2008, 

2009, 2010, 2011, 2012. People will not understand that all of their 

benefits will end abruptly; they are used to a cascade. And I think 

if I were still staffing, as I did for many years, in the other Chamber, I would be letting people know that, because some people may 

be getting job offers that don’t meet the job that they lost either 

in terms of dignity or salary, and they may be holding out to wait 

for a better job offer that is closer to the job they lost. They need 

to really understand that in January of 2013 they may not have 

another option. 

Mr. PAULSEN. Yeah, and to know that those job options are 

going to be employment options before that cliff hits. 

So let me ask you this: Are there any other economic indicators 

that you would maybe hold out there that might be indicative of 

when it is time to end the temporary extension of these unemployment benefits? Is it 7 percent, is it 61⁄2 percent, is it 6 percent? You 

know, is there some sort of other benchmark or marker when it 

sort of makes sense to start to phase that out? 

Ms. OATES. You know, I think we are all confused about what 

everything means. I mean, I think that the chairman brought up 

people who are off our radar screen who have already exhausted 

benefits, that are still searching or underemployed. So I don’t know 

what the right number is. And, quite frankly, over the last 3 years, 

we have seen things like the economic situation in Greece and the 

tsunami impact our economy when none of us would have been 

able to predict that. 

So I wish I could give you a better answer. The only answer that 

I can give you is that we are trying to put as much information 

out there as we can and work as closely with employers as we can, 

both directly and through our regions, you know, our States that 

are such important partners with us, but also our local one-stops, 

to help figure out, you know, what are the indicators out there besides just looking at warn notices with layoffs, but also starting to 

look at where are we seeing job growth in your State, in Minnesota, as well as in other States, so that we can figure out—we 

could come to you and say, look, it looks great; it looks like these 

companies are really on solid ground, and they are going to be adding jobs for the next 5 years. I just don’t have anything, any indicator that really predicts that right now. 

Mr. PAULSEN. Okay. Let me ask one other question, because we 

talked about the reforms being targeted to those who are able to 

work and actively looking for work. Under the new law, the States 

are also required to reduce current State and Federal UI checks to 

recover any prior overpayments for unemployment, but with about 

11 percent rate of overpayment being in error, it is about $30 billion, actually a huge amount of money. What effort is the Department of Labor making right now to help States implement some of 

those new overpayment recovery requirements? 

Ms. OATES. You know, we are really doing everything in partnership, mostly with NASWA, who is their association, and individually with States. We are trying to give them clear guidance, and 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
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we are really trying to tell the stories of the States that have done 

a great job at this. 

We haven’t done a lot of work on specific tools with them, although we will, just as we did last year, have some additional over 

the base money that we will be putting out for States to work on 

things like integrity and improvement of their IT system. And we 

are hoping that States, just as they did in the past, will take advantage of this to customize this additional money to an area that 

is in need for them. Some States are having a tougher problem 

with IT in terms of overpayment; some are having a tougher time 

interacting with other State agencies as well as Federal agencies. 

For us that is Treasury, but in a State that could be two or three 

different State departments. 

Mr. PAULSEN. Are certain States having more success reaching 

that? 

Ms. OATES. I can tell you best about the States that are having 

real initial success on the TOP program where they can garnish it 

from people’s tax returns, and so far we have seen somewhere— 

and I will get you the exact number—somewhere in the area of 

about $135 million in terms of reclamation since that program 

started. So the early-on States like New York, you know, did a 

great job on that, and newly we have had Mississippi that has 

come on later in this year, and they have had a great success rate 

in getting money back that way. 

You know, we would like to suggest that our system—because my State friends will tell you this—you know, if you do $10 in overpayment and you reclaim 9 of it, you are still dinged for having $10 

in overpayment. You know, we would like to look at ways that we 

can address the system so that States could get the credit for getting that $9 back in reclamation. We don’t think it is a $10 overpayment anymore; we think they reclaimed 9 of it. So until we can 

get our system to reflect that, I don’t think we are doing enough 

to incent States and recognize them for their efforts in this area. 

Chairman DAVIS. Thank you. 

The gentleman’s time has expired. The chair now recognizes Mr. 

Berg for 5 minutes. 

Mr. BERG. Thank you, Mr. Chairman. 

Secretary, thank you for being here. 

Ms. OATES. Hi, how are you? 

Mr. BERG. I tell you, one of the bright spots in my first year in 

Congress was when we were talking about the HIRES Act. We 

were talking about these pilot projects in a bipartisan way that we 

said, you know what, the best solution is to put people to work; the 

best solution is to have them find a job that works for them. And 

I think almost unanimously some of the senior veterans as well as 

other freshmen said, you know, we think the States can probably 

figure this out best for their population. They know what their population needs; they know what the work opportunities are on that 

local level. 

And so that was the thrust that has been behind this pilot 

project, and one of my top concerns is it seems to me that we are 

not going to have anyone who is going to have a chance to even 

do one of these pilots before it expires. And my goal or quest is 

really to encourage the States to have innovation, to come up with 


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things, and, sure, to meet all these requirements and meet all the 

laws, but, more importantly, to put someone back to work as quickly as we can. 

So I guess my first question to you is what are the main barriers 

you are hearing from States? If you said, here is the top three 

things that they are saying that they have problems with this, 

what would they be? 

Ms. OATES. With the demo, sir? 

Mr. BERG. Correct. 

Ms. OATES. We haven’t really heard a lot from States. I mean, 

I have heard some from my friends who have said, really, 19 pages 

worth of guidance? So they didn’t like the length of the guidance, 

but we haven’t heard a lot about the specifics. I am sure you will 

hear. You have two terrific State folks here on your second panel. 

I am sure you will hear things, and I am sure we will hear a lot 

more on Friday during the Webinar. 

Mr. BERG. So you don’t have things today that you can tell this 

panel here is the number one, number two or number three thing? 

Ms. OATES. I don’t, I am sorry. Friday I might. 

Mr. BERG. So let me just ask you this: If, in fact, through the 

rest of this panel we are hearing things that quite frankly are redundant requirements or barriers that really don’t make sense because they are qualifying, are those things that you are open to 

saying, okay, we are going to relook at these requirements or the 

things that are redundant to help streamline this? You are willing 

to do that? 

Ms. OATES. I can’t say that I am because that would slow down 

the process. Quite frankly, we have the guidance out there, and we 

don’t know if people are already working on applications under 

that guidance. I suppose that if we find in, you know—— 

Mr. BERG. I am saying if someone says here is something that 

you are asking in these 19 pages that you already have or you don’t 

need . . . I mean, one of my concerns is I heard or saw in the testimony one State was saying it is going to require us to hire another 

full-time person to fill out this application. And so if there is a way 

to streamline this, is that something you are open to giving a waiver of the requirements? 

Ms. OATES. Requirements for waivers, yeah. I don’t know how 

I could say yes to that since this is not a process that is just me, 

it goes through a clearance process. So that if we were going to 

make changes, we would have to go through that clearance process. 

And, again, unless we suspend it and said don’t respond to the 

guidance that we put out, we have no idea how many States are 

at the 10-yard line on this and finished, so if we change the rules 

now, would that mean they had to go back? 

But, certainly, let me give you a scenario. If no States applied 

in the first several months, I think that would make us go back to 

the drawing board on this one. I think that States—there are some 

States that may not apply for other reasons. They are all under the 

gun and stretched doing REA and RES for everyone. 

Mr. BERG. Well, let me ask you. I mean, if no one applies for 

2 months, we have lost the opportunity of what we are doing. 

Maybe just to make it more simple, if, in fact, as we go through 

the panel, if on a bipartisan basis our legislative committee here 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
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says, here are things we think are redundant, here are things that 

we think would help remove some barriers, I am asking you, is 

that be something you would be open to? 

Ms. OATES. I think we would at least be willing to discuss it 

with you, and share with you, get your ideas and share with you 

what that would mean in terms of our getting implementation, absolutely, sir. 

Mr. BERG. All right. Thank you. I will yield back. 

Chairman DAVIS. I thank the gentleman. 

The chair recognizes Mr. McDermott from Washington for 5 minutes. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

I was once a State legislator, and some of the people up here 

were State legislators. We all have been through the business of 

setting your unemployed insurance rate, tax rate for the State, and 

State legislators love to cut the taxes on their businesses, so they 

are always thinking, well, there is this—we already got this pile of 

money over here in the account; why shouldn’t we lower the rate? 

And now we have $41 billion in debt at the State level, and I am 

sure State legislators aren’t very interested in raising those rates 

to take care of those things. 

What leverage do we have in terms of forcing the States to pay 

their debts to the Federal Government? I mean, they are riding on 

our back. They are buying our money. They are getting our money 

for free, and they are going on down the road, acting like it was 

falling out of the sky for nothing. We are paying taxes at the Federal level for the failure of the States to tax adequately to cover 

their own funds. So what leverage do we have in that game? 

Ms. OATES. Well, first of all, now that the Recovery Act money 

is gone, all States are paying interest on the money that they are 

borrowing. 

Mr. MCDERMOTT. Are they paying it? 

Ms. OATES. Yes. And they are—there are mandatory increases 

to their FUTA tax if they are in borrowing status as of a certain 

date, and I can get you that information. In fact, 20 States will actually see their rate go from .3 percent to .6 percent, and I think 

two States will actually be at .9; one that I can think of, but there 

might be a second. 

So those mandatory triggers happen and, you know, some of the 

things, it is a problem for their trust funds. We have seen the borrowing slow down dramatically. But you are right, I mean, we still 

have $41 billion that is owed to the Federal fund. 

Mr. MCDERMOTT. Could you give us a list—— 

Ms. OATES. Sure. 

Mr. MCDERMOTT. I would like to see that so we can see where 

you are in sort of recovery or forcing the States to be responsible. 

We talk about responsibility up here a lot. 

Ms. OATES. Absolutely. I can send that to the chair today. We 

have that list. We will make sure that we put on there as of a certain date. 

Mr. MCDERMOTT. Okay. I have a second question, and that is 

this whole business, and Mr. Doggett touched on it, of the Workforce Reinvestment Act, and the legislation or the budget resolution 

that says we are going to cut $16 billion out of there. That is 


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money we are not using for anything, I guess, useful anyway, so 

the States won’t miss it. Is that your view? 

Ms. OATES. Well, the States are already limping because both 

of us, the Congress in the previous years and this year in the President’s budget, have taken away what they have had since 1998. 

They have been able to keep 15 percent at the State level, 5 percent for admin and 10 percent for State activities. And that money 

was used to be glue, you know, to fund things like the kinds of 

things we are talking about today without UI funds. 

But if we are to cut the workforce investment funds to States, 

States are not going to be the only ones who suffer. Local areas. 

Local areas run the local boards. They are the ones that have direct conversations with business, businesses that may be too small 

to be captured in LMI data at the States, but the businesses that 

are really creating jobs. 

I think it is a huge mistake, sir. Of course, I have a self-interest 

in this. I love the bill, I love ETA, but if the Workforce Investment 

Act goes away, there are going to be real people who don’t get information on jobs in demand, who don’t have access to the training 

they need in order to qualify for those jobs and, quite frankly, have 

no one caring whether they are retained in those jobs or not, and 

I am talking about people like all of us as well as vulnerable populations. 

Mr. MCDERMOTT. When you are talking about these entrepreneurial, States are being given the flexibility to use their funds for 

entrepreneurial things for the first time. 

Ms. OATES. Uh-huh. 

Mr. MCDERMOTT. As we pull away, is any of this Reinvestment 

Act money being used in training those people who are going into 

the entrepreneurial kind of thing? Is there a connection, I guess, 

is what I am really looking for? 

Ms. OATES. Yes, sir. We are not the experts in that, so what we 

have done is partnered with SBA, the Small Business Administration, because they are the experts in this. So whether we are doing 

entrepreneurial activities through a one-stop or through a State, or 

whether we are doing them in one of our Job Corps, we are 

partnering with SBA. 

All of our one-stops offer people access to things that help small, 

budding entrepreneurs, computers, fax machines that they might 

not have at home in order to start their business, and an ability 

to use space sometimes to meet with other people. Some of our onestops are partnering with 4-year and 2-year colleges that operate 

business incubators. They are linking them with that business incubator. I think our system is trying not to duplicate things that 

already exist in their community, but partner with local colleges or 

other entrepreneurial efforts like trade associations that are already doing this and learn from them. 

Mr. MCDERMOTT. Thank you. 

Chairman DAVIS. The gentleman’s time has expired. The chair 

now recognizes the gentlewoman from Tennessee Mrs. Black for 5 

minutes. 

Mrs. BLACK. Thank you, Mr. Chairman. And, Ms. Oates, thank 

you for your testimony here today. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
32 

We all know in the unemployment world there are several pieces 

of information reported on a regular basis that experts examine to 

gauge the economic health of the economy, and one important piece 

of information is the weekly reports on initial claims for the unemployment benefits, which are released every Thursday by the Employment and Training Administration, over which you are the Assistant Secretary. 

This data comes out in a preliminary form one week, and then 

it is revised to be the final report in the following week, and a 

number of reviewers have noted on a pretty consistent basis that 

these first initial claims data have been revised upward and only 

upward when they are made in the final week. 

For example, on April 5th, the Wall Street Journal reported ‘‘the 

Dow Jones analysis of claims reports found that the Labor Department has revised upward its first estimate of seasonal adjusted 

claims of 56 of the past 57 weeks, and revisions to the government 

data occur on a regular basis, but it is uncommon for the numbers 

to nearly always be restated in the same direction.’’ 

And the article went on to say, ‘‘while the consistent need for upward revisions doesn’t undermine the overall trend of the improving job market, it does suggest that the government’s methodology 

for the initial estimate might not properly take into account factors 

such as seasonal adjustments and under accounting by States.’’ 

So is the ETA aware of this issue, and, if you are, should experts 

and policymakers be concerned about this data revision always 

flowing in one direction; that is, when the initial reports are always 

revised upward? 

Ms. OATES. This is something that we are aware of, and, you 

know, we don’t do this alone. We do this in partnership with our 

sister agency, the Bureau of Labor Statistics, BLS. And the fact is 

that basically seasonal factors are challenging, and that is what we 

are working with. 

But happy to give you and your staff a better briefing with both 

of us there. This is not my area of expertise, Congresswoman, at 

all, but this is something that we have noticed. And, you know, we 

would love to explore with the committee, your staff any way 

that—your ideas on how we can improve this. We don’t like that— 

we don’t like always being off either, and we are not quite sure 

what it means that we are always adjusting up. Is that because 

people are conservative in what their initial estimates are? These 

are all estimates as we try to get this moving. And should we 

maybe not do it weekly so that we can have more time to make 

the number correct? We have had all those discussions and would 

welcome your expertise and your staff’s in those discussions with 

us. 

Mrs. BLACK. So you have had discussions, but you don’t have 

any plan at this point in time to say . . . this is what we are going 

to do to try to better balance this? It is just still in the discussion 

phase; is that what you are saying? 

Ms. OATES. Yeah, we do not have a plan. I mean, basically there 

has been no allegation of wrongdoing in any of this. No one has 

told us we are doing anything wrong. It is just that we—this is a 

complicated issue, and there could be better ways to do it. And we 

would be delighted to have conversations and get your ideas about 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
33 

what those might be, and I am sure my partner Jack Galvin at 

BLS would feel the same way. 

Mrs. BLACK. And likewise, I would like to hear about what your 

discussions are in the office where you may come up with something that you can bring back to us to say, this is what we have 

thought about and researched and found would be more effective. 

Ms. OATES. Certainly. 

Mrs. BLACK. Let me turn to something that has already been 

discussed, but just to follow up on the unemployment insurance 

benefit overpayments. In one of the charts that we have in our folder, we see that there was a $13.7 billion overpayment, and I wanted to know if there is anything being done to collect this overpayment or how that is done. 

Ms. OATES. Well, as you know well, the States are the primary 

agents in this. We run this program only through them. So different States are doing different things in order to do the re-collections. I talked a little bit about the States that are already using 

the garnishment of Federal tax returns. Some States are looking at 

using State tax returns as well. 

So that I think that each State is actively working in this. I 

mean, in our improper payments activities, I am delighted to report 

to the committee every State has a task force, cross-agency in their 

State. Every State has a plan, and we are really starting to see terrific trending. 

You know, the trend in improper payments, whether over or 

under, was going up since 2008, and we are delighted that finally 

in fiscal year 2011, the trend is ticking down. Not fast enough, we 

are not reclaiming enough money, but States are really paying attention to this in the midst of the busiest time, in my lifetime, that 

States have had in the UI program. 

Mrs. BLACK. Do you have any numbers for us to say what those 

percentages are that they are recovering? Do we know what those 

percentages are overall? Also, I would like to know specifically 

State by State what kind of recovery is occurring so we can get a 

better handle on making sure the taxpayer dollars are being used 

efficiently. 

Ms. OATES. Absolutely. The numbers that we could give you in 

a table today are the numbers from the TOP program, that is the 

Treasury Offset Program, but I would be happy to work with my 

staff and NASWA. We would have to collect that information from 

the States. We would be happy to do that. 

Chairman DAVIS. Thank you. 

The gentlewoman’s time has expired. I would now like to welcome the distinguished gentleman from Texas, a senior member of 

the committee and also the chairman of the Subcommittee on 

Trade, Mr. Brady. Thank you for joining us today. Would you like 

to ask a question? 

Mr. BRADY. Thank you, Chairman Davis, for allowing me to sit 

in today and for calling this hearing. 

As you know, we literally have tens of millions of Americans who 

can’t find a full-time job. We have millions more who have simply 

given up looking for work. After all the bailouts and stimulus and 

programs, we have fewer Americans working today than 3 years 

ago. We have fewer, about 700,000 fewer, women working today 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
34 

than 3 years ago. That is why when Republicans and Democrats 

passed the payroll extension bill, it included important reforms to 

unemployment to try to match local workers with local jobs sooner, 

because what we are doing clearly isn’t working. 

I sat on that conference committee, sat through the discussions, 

and a key part of that reform was to allow States, many of whom 

have successful, innovative programs, to step forward and share 

that innovation in programs to allow us to better get people back 

to work. The law we passed, passed by both Republicans and 

Democrats, clearly said the first 10 States to meet the criteria laid 

out in that new statute would receive the waivers in order to allow 

the innovation to go forward. Texas submitted their application 2 

days after the President signed the law, and rather than being accepted, embraced, and put to work, Texas was denied. 

So the two questions I have are, one, is the Department of Labor 

ignoring the intent and statute of Congress when it comes to these 

waiver programs to allow the States to innovate? 

Ms. OATES. Absolutely not, sir. The statute gave the Secretary 

the option of approving a demonstration project. 

Mr. BRADY. Well, I would counter, no, it gave the States the option to apply for an innovation project. The mandate within the law 

was that the Department of Labor would grant 10 waivers, up to 

10 waivers, for States that apply on a first come/first serve basis. 

Ms. OATES. Sir, with great respect, and I am a former staffer, 

the word was ‘‘may’’ and not ‘‘shall.’’ So it gave the Secretary the 

option. I mean that with great respect. 

Mr. BRADY. And I do, too. I just was a lowly Congressman serving on the negotiating team. 

Ms. OATES. Lowly staff person. 

Mr. BRADY. We clearly had discussions here. And so in my view, 

with the delays you are putting in place, you are hurting a lot of 

workers who could be taking advantage of this innovative program 

at the State level. I think you are substituting the administration’s 

judgment for that of Congress. And one of my worries is that this 

is an election year, and that the Department of Labor is playing 

politics with a very important program. 

In your testimony you made the point that you want to embrace 

best practices and innovation in these programs; is that correct? 

Ms. OATES. That is correct, sir. 

Mr. BRADY. The Texas program a year and a half ago received 

an award from your agency—— 

Ms. OATES. Yes, it did. 

Mr. BRADY.—for innovation and best practice. 

Ms. OATES. And deserved it, yes. 

Mr. BRADY. They submitted that program to you in a timely 

manner and were denied. So why the delay? Why the denial? 

And, by the way, if that waiver had been granted, and Texas 

would have been allowed to go to work, we would have more than 

2,000 Texans back to work today who aren’t. So are you ignoring 

the intent of Congress, or in this election year, are you playing politics with such an important issue? 

Ms. OATES. Sir, we are neither ignoring the intent of Congress, 

nor are we playing politics with this. Quite frankly, Congress told 

us the Secretary could approve up to 10 demonstrations, and these 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
35 

demonstrations for the first time in history could use their UI 

Trust Fund dollars to do this experimentation. 

By telling us we could do up to 10, and to do them as demos that 

would show innovative practices that could be institutionalized and 

used into the future at net cost neutrality to their trust fund, you 

put us in a situation where we had to be, just as you are every day, 

good stewards of the taxpayers’ money. 

Mr. BRADY. Now, you recognize, don’t you, that States using innovative programs today are actually investing their own dollars—— 

Ms. OATES. Absolutely, sir. 

Mr. BRADY.—in these programs? So there is very poor—— 

Ms. OATES. And in the case of Texas, that 10 percent money 

that I was talking about was the money that—which the Governor 

used. 

Mr. BRADY.—which is, I think probably as or equally or more 

important than the trust fund dollars. And my question continues 

to be if you are not ignoring the intent of Congress, not playing politics, when will these applications be granted? Will they be granted 

in May? 

Ms. OATES. Within 30 days of the day they submit them to us. 

You have my word on that. We have a timeline internally, and we 

are—the career people are running this process. 

Mr. BRADY. So that could be, what, months from now? 

Ms. OATES. Well, if the first application comes in today, it will 

be 30 days from today. 

Mr. BRADY. But you just heard from those most interested that 

the paperwork is very burdensome, the criteria, again, is much 

broader than what Congress intended. You have taken what was 

an enthusiastic response by States to want to help you and may 

put people back to work and have, frankly, chilled it. I would be 

surprised if many States, frankly, step up now, given the fact it is 

now top down rather than innovation up. 

I yield back, Mr. Chairman. 

Ms. OATES. I will be disappointed, sir, if we don’t. 

Chairman DAVIS. I thank the gentleman. 

The chair would also like to apologize to the gentleman from 

New York, who became an inadvertent victim of circumstances, 

and I would like to recognize him now for 5 minutes. 

Mr. REED. Well, thank you very much, Chairman. I appreciate 

that apology. But no offense taken ever with me. 

Thank you for being here with us today. I wanted to follow up 

on something. When I was on the conference committee for the 

payroll tax rate and unemployment extension, one issue that came 

up that I took personal interest in was the drug-testing ability for 

folks on unemployment insurance. And I was proud that as part of 

the final package that the authority to the States was granted in 

that legislation to implement programs to drug-test folks in that 

situation, because I do believe that one of the things we should be 

doing not only by providing people who are in the circumstance of 

being unemployed with resources to carry them through that, but 

put ourselves in the best position to arm those individuals to control their own individual destiny, and if they shall or should or may 

have a drug issue, which I firmly believe is a major barrier to reVerDate Mar 15 2010 08:09 Oct 28, 2013 Jkt 078665 PO 00000 Frm 00039 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78665.XXX 78665

wwoods2 on DSK499XVN1PROD with WAYS & MEANS
36 

employment, that the tools are there to identify the issue and have 

those individuals overcome it so that they can get back to an employed status sooner than later. 

But I would note your Department has yet to release guidance 

for the States on how to proceed with that new authority. You 

noted that you are consulting with the Substance Abuse and Mental Health Administration in HHS about the drug-testing provisions of the new law, specifically the section allowing States to 

screen and test individuals seeking jobs in sectors requiring drug 

tests as an eligibility requirement. 

I would encourage you also to consult with the Society for 

Human Resource Management, which in 2011 issued a study that 

found that 57 percent of organizations conduct drug testing on all 

job candidates, and 71 percent of organizations conduct some form 

of preemployment drug testing on at least some candidates. 

At this point, Mr. Chairman, I ask unanimous consent to insert 

that SHRM study in the record. Has it already been done? 

Mr. PAULSEN [presiding]. No objection. 

[The information follows, The Honorable Tom Reed:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
37 


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Key Findings 

What percentage of organizations conducted pre-employment drug testing in 2011 ? More than 

one-oalf of organizations (57%) indicated that they conduct drug testing on all rob candidates, More 

than one-Quar1er (29%) of the organizations do not have a pre-employment drug testing program, 

Is there a tie between drug testing programs and absenteeism? Yes. In organizations with high 

employee absenteeism rates (more than 15%), the implementation of a drug testing program appears 

to have an impact. Nine percent of organizations reported high absenteeism rates (>15%) prior to a 

drug testing program, whereas only 4% of organizations reported high absenteeism rates after the 

implementation of a drug testing program, a decrease of approximately 50%. 

Are workers' compensation rates affected by drug testing programs? Yes. In organizations with 

high workers' compensation incidence rates (>6%), the implementation of a drug testing program 

appears to have an impact Fourteen percent of organizations reported high workers' compensation 

incidence rates prior to a drug testing program. whereas only 6% of organizations reported similar rat

of workers' comp after the implementation of a drug testing program, a decrease of approximately 50

Do drug testing programs improve employee productivity rates? Nearly one-fifth (1 g%) of 

organizations experienced an increase in productivity after the implementation of a drug testing 

program. 

How much of an impact do drug testing programs have on employee turnover rates? Sixteen 

percent of organizations saw a decrease 'in employee turnover rates after the implementation of drug 

testing programs, 

Do multinational organizations apply similar drug testing protocols/policies in the United State

and globally? Nearly three-Quarters (72%) of organizations that have multinational operations 

indicated that ali, almost all or some of the same protocols/policies are applied While conducting drug 

tests outside the United States_ 

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Insert 78665A.019wwoods2 on DSK499XVN1PROD with WAYS & MEANS

For approximately how many years has your organization been 

conducting pre· and/or post·employment drug testing? 

7 years or more 

5 to 6 years 12% 

3 to 4 years 12% 

1 to 2 years 

Less than 12 months 

69% 

N(,Ie. n s 626. P",,,,,nt .. <1<1Il0l total tOO% doo !o roulldin!l. liR _,., 851<"" to _ fQ the hlglHMl yea," 

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Insert 78665A.020wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Does your organization conduct pre-employment drug testing 

with job candidates? 

57% 

All job candidates i 55% 

Selected job candidates (e.g., for safety-sensitive I--UiI 

positions) [ I • 17% 

When required by state law (e.g., DOT) 

l4% 

7% 

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• (57%) [I>dicaled that tl\ey c:ooduct drug 

t testing on aU ioP (CIl/!did81e:j. M<lI1! \!'Ian 

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No. my organization does nol conduct drug testing . _ J1 

0 2011 0 2010 

n "' 320' 

for any of its job candidates 

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Insert 78665A.024wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Does your organization conduct and/or post-employment 

drug testing with its contract employees? 

Comparison by Organization Staff Size 

Larger organizations (500 or more employees) are more likely to conduct pre-employment drug testin8 for 

contract employees compared with smaller organizations (fewer 500 employees). 

Smaller Organi.atlon. l.orge r Difference. Based on Staff Si.e 

.500 to 2,499 (30%) 

.1 to 99 emplovee, (17") .2.,WO to 14,999 emplovees (36%) · 100 10 499 employees (19%) larKe. orKilnilation. ,. ,mallei organilitioM 

' 25.000+ employees (44'110) 

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48 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.025

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Insert 78665A.026wwoods2 on DSK499XVN1PROD with WAYS & MEANS

To what degree are the U.S. and/or 

protocols/polices also applied at locations outside the United 

States? 

To a large degree-all or almost all of Ihe 

same prOlocols/policies are applle<! al 

locations outside the U.S. 

U\ree-quao1e<s (72%) 0

OIgan,zabons thai have 

3301 ' multinalKlMI ope!aboos Iodic

/0: thai an. almosl all 01 some of 

, same prolOCOlsJjJOiicies are 

\ applied while oondUding drug 

the Uniled Slates. 

To some degree-some of the same Id • 390,{ protocols/polices are appUed at locations II,-. _________ J 0 

outside Ihe u.s. '. 

To no few or none of the 

same protocols/policies afe applied at IJ.. ' 

locallons outside the U.S. • 

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Insert 78665A.028wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Absenteeism rates at organizations before and after drug testing 

program implementation 

Before implementation of a drug After implementation of a drug 

testing program testing program 

("a 182) (" a 111) 

0-15% 91 % 96% 

More than 15% 9% 4% 

.. 

--

-, 

.--- ----------------------------------

9% of O1'ganizallons reported rngh absentHism rales. (more lhan 15%) 

AMer implementation of e drug testing program 4'11. 01 organ1lations 

reported high absllnleeism rallls. a of approiUmately 50'11.. 

-- -

... ---._----------- --- --- --- ------ ----

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Insert 78665A.029wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Workers' compensation incidence rates at organizations before 

and after drug testing program implementation 

Beta,.. implementation of a drug After implementation of a drug 

testing program testing program 

1" ..... 1551 I" " lUI 

04 6% 86% 94% 

More than 6% 14% 6% 

----

---

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-

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, 

, 

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1."" Df Ofgan1zations repo.1et1 high worte<s' cOr{lll<lnsalion "JCideoce rS11tS p"';" - - - - _ 

to a drug testing program, whereas only 6% Df OrQ<l"lZ8ilons rePOrted similar mtes "-

01 workel'll' comp after the implementBtion of 8 drug testing program, a dSCl'ease ' of apllrOl(lmalaly-50%.. ", 

---. 

No/Jo: HR .. oo an_Old ."".. wre-..... e 81:_ r""" rhl .. 

Insert 78665A.030wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Change in employee productivity in organizations after drug 

testing program implementation 

1% 

Decreased 

/ 

81% 

, 

, 

, 

, 

-

Remained the same 

--

.. 

NMfly one·frfln (19%) 01 

OfganlzallOfls experienced an 

increase in ptOduClMly after 

the lmp!em&!1tatlon 01 OJ drug 

. teslif19 program. 

------ -.-

19% 

Increased 

Nore.. n • !i13. HR p«>feSfliotllJ/8 who an_ -no! .. "",. _'" tu.cluded /rom 1/110 ooaIysls_ Pett:6nlago>s do ,... /Oi/}j 100,.; d .... 10 

--

, 

, 

Insert 78665A.031wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Change in employee turnover rates in organizations after drug 

testing program implementation 

16% 

Decreased 

76% 

---- -------. 

,,-

-"" 6% of organizatIOns saw a o;IocreaSl.! (n t employee turnover ",lies aft .. r tile 

of drug 1"'1In;g p<ograms. 

-- ------_.-

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NOM. n • 520. HR {JIOle&!iJonalt; who 8n_&<1 -no! _rG ""c/ixJed from 

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55 


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Insert 78665A.033wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Does your organization conduct drug testing in-house or at an 

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What are the primary reasons your organization does not 

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Insert 78665A.040wwoods2 on DSK499XVN1PROD with WAYS & MEANS

What is the primary reason your organization does not conduct 

pre- and/or post-employment drug testing? 

Comparison by Organization Staff Size 

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Industry 

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Wholesa)e trade 2% 

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Insert 78665A.045wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Demographics: Organization Sector 

PublICly owned for-profit organization 

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Nonprofit organization I 19% 

Government sector I 8% 

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Insert 78665A.046wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Demographics: Other 

Does your organization have U.S.-based 

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does It operate muillnationaily? 

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71 

f 

Mr. REED. Thank you very much, I appreciate that, Mr. Chairman. 

Madam Secretary, could you tell us when you expect to issue 

that guidance that you are consulting with the—at this point? 

Ms. OATES. Absolutely, sir. And, you know, I apologize. We 

would love to get everything done at once. We worked at first on 

the things that had a mandate, especially the REA/RES with the 

30-day deadline and the demo, on which we put our own internal 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.047
72 

mandate because States were interested in it. We hope to have that 

done in the next month or two. We hope to have all this guidance 

out by June. 

Mr. REED. By June, okay. And will it be limited to identifying 

what occupations are eligible as directed by the act, or will the Department of Labor take additional criteria on States trying to use 

this authority as you did with the guidance on waivers? 

Ms. OATES. Well, I think we will continue to have consultations 

with our stakeholders. You give us—I don’t think we have talked 

to SHRM before, so that is a great addition. But our hope is that 

we will do the right thing, and, again, I don’t want to—we haven’t 

issued the guidance yet. We have had discussions. I haven’t even 

seen drafts from my career people yet, so I really can’t answer your 

question. 

Mr. REED. Do you find any sentiment within your agency of objection to this ability of States to utilize this new tool for reemployment by drug testing? Is there anything in the agency that would 

cause concern that this policy or this initiative or this authority to 

the States would be hampered because of a—as I heard in that conference committee in the debates from my colleagues on the other 

side of the aisle that they were adamantly opposed to this type of 

requirement or tool because there was something that they disagreed with. Do you see that within the agency at all, or are you 

seeing any concern about that? 

Ms. OATES. You know, I think the longstanding tenets of this 

are someone who loses their job because of drug involvement on the 

work site has never been eligible for unemployment, so I don’t see 

any change to that coming. 

And then this idea that—what we are struggling with is the language that States have the right to drug test someone who’s only 

suitable work is in jobs that require drug testing. So finding those 

jobs and giving clear guidance to the States is what is really taking 

our discussion time now. But in terms of seeing any hurdles within 

our building or any must-dos or must-haves other than what is current long-term practice, no, sir, I don’t see anything coming in 

those discussions that would be, you know, hurdles to getting this 

done quickly and getting it done consistent with the intent of Congress. 

Mr. REED. I appreciate that. Thank you very much. I look forward to working with you on this issue. And with that, Chairman, 

I will yield back. 

Chairman DAVIS. I thank the gentleman. 

I want to thank you, Secretary, for joining us today. We look forward to continuing to correspond with you and work with you, and 

appreciate you getting back to my office on the question that I 

asked specifically for documentation, as well as the other Members. 

If Members have additional questions, they will submit them to 

you directly in writing, and all we would ask is that you reply or 

give a copy of the reply to the committee staff so we can make sure 

that it is inserted into the record. 

Ms. OATES. Absolutely. 

Chairman DAVIS. Thank you very much for being here. 

Ms. OATES. It is a pleasure to work with this committee, sir. 

Thank you so much. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
73 

Chairman DAVIS. That concludes the first panel. I would like to 

invite our second panel to come up. 

Chairman DAVIS. I appreciate all of you gentlemen joining us 

here today for our second panel to continue this discussion on the 

unemployment insurance program, the reforms that have been 

made and, the implementation thus far. 

On our second panel we are going to hear from Mr. Darrell 

Gates, deputy commissioner of the New Hampshire Department of 

Employment Security; Mr. Larry Temple, executive director of the 

Texas Workforce Commission; Dr. Wayne Vroman, senior fellow of 

the Urban Institute; Mr. Douglas Holmes, president of UWC, Strategic Services on Unemployment and Workers’ Compensation; and 

Mr. Michael Cullen, managing director of OnPoint Technology. 

Before we move on in the testimony, I would like to again recognize Chairman Brady from Texas to introduce the witness from his 

home State, Mr. Temple. 

Mr. BRADY. I again want to thank Chairman Davis for his leadership in calling this hearing. And to all the witnesses who are 

here to testify today, it is a special pleasure to welcome Larry Temple, an outstanding public servant from my home State of Texas, 

to the Ways and Means Committee. 

In 2003, Larry took over as executive director with the Texas Workforce Commission, a State agency with a budget of nearly $1.1 

billion. The commission has oversight over all the state’s employment training, welfare reform, child care and unemployment insurance programs. 

During his time at the commission, Mr. Temple designed, implemented and administered Texas’ successful welfare reform initiative. A significant portion of this initiative involved the transition 

of welfare services via block grant to our local workforce development board, and the result was an unprecedented caseload reduction to unemployment, and national recognition as one of the top 

10 programs in the Nation for putting welfare recipients to work. 

It is an issue dear to the heart of this committee and critical to 

the country at this time. He has an exemplary record designing 

programs that help people get back to work. I am grateful he can 

share his expertise with us today, and I welcome you, Mr. Temple, 

along with the rest of the witnesses. Thank you. 

Mr. Chairman, I yield back. 

Chairman DAVIS. All right. Thank you, Chairman Brady. 

Mr. Gates, please proceed with your testimony. You are recognized for 5 minutes. 

STATEMENT OF DARRELL GATES, DEPUTY COMMISSIONER, 

NEW HAMPSHIRE DEPARTMENT OF EMPLOYMENT SECURITY 

Mr. GATES. Thank you. 

Good morning, Chairman Davis, Ranking Member Doggett and 

Members of the Committee. My name is Darrell Gates. I serve as 

deputy commissioner for the New Hampshire Department of Employment Security. I also serve as chairman of the Unemployment 

Insurance Committee for the National Association of State Workforce Agencies, known as NASWA. On behalf of NASWA, I am 

pleased to speak on the implementation of the Middle Class Tax 

Relief and Job Creation Act of 2012. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
74 

States have done an extraordinary job reacting and adapting to 

the unprecedented challenges of the great recession. From 2008 to 

2010, benefits paid to UI claimants more than tripled from roughly 

$42 billion in fiscal year 2008 to $143 billion in fiscal year 2010. 

The rapid and unprecedented increase in UI claims since 2008 

brought some State programs nearly to a breaking point. This is 

due to the lack of funding for UI computer technology. State UI 

programs have information technology systems averaging 25 years 

old and are unable to easily adapt to programs such as Emergency 

Unemployment Compensation Act of 2008. But States are moving 

rapidly to implement the new law, and my comments will focus on 

the progress of implementation. 

First, States appreciate the new law kept the current tier structure intact. If the program is continued beyond the end of the year 

with the goal of an eventual phaseout, NASWA recommends it 

should be accomplished by either adjusting the unemployment rate 

triggers for the tiers, the number of weeks in each tier, or eliminate tiers in reverse order with the last tier being the first to be 

eliminated. 

Second, States applaud Congress for funding reemployment activities known as RES and REAs. States are moving aggressively 

to meet with roughly 9 million workers by the end of the year to 

comply with the in-person requirement. But the process could be 

easier if USDOL recognized basic technology, such as the telephone 

and video conferencing, that allow for virtual in-person meetings. 

In New Hampshire and other States, investments have been 

made in video conferencing. This technology would speed along the 

meetings with claimants and provide the services they need, but 

USDOL has said this would not comply with the in-person requirement. 

Third, NASWA recommends early intervention of reemployment 

services as soon as the claimant files for UI. Providing these services in week 1 rather than week 27 yields the greatest return for 

the unemployed, employers and taxpayers. 

Fourth, NASWA recommends a permanent REA and RES program through our capped entitlement grant at $500 million per 

year. We recognize this is challenging, but it would ensure States 

receive sufficient funds for reemployment activities to help the jobless go back to work sooner, which also could lead to lower benefit 

outlays and lower employer taxes. 

Fifth, on the demonstration projects we recommend that reemployment bonuses should be added as a permissible activity. The 

bonus could be graduated to pay larger bonuses for early returns 

to work and progressively smaller bonuses for later returns to 

work. 

Also, New Hampshire, and I suspect other States with limited 

staff, will likely not apply for the demonstration projects because 

USDOL imposed too many conditions. My State would need an additional staff person to assure the application was complete. 

Sixth, on the work search criteria, States should have the flexibility to conduct the work search data that best meets the needs 

of the States. USDOL has told New Hampshire that paper logs 

must be submitted during the in-person session even though my 

State collects this information electronically. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
75 

Seventh, on a nonreduction rule, NASWA recommends it should 

be eliminated completely and not just modified. States should have 

the flexibility to determine the most appropriate methods for addressing Unemployment Trust Fund solvency. 

Eighth, on the data exchange provision, NASWA strongly agrees 

that data on participants in various publicly funded programs could 

be collected, stored and exchanged more efficiently, and used more 

effectively. NASWA is hopeful OMB will fund a NASWA proposal 

to improve payment accuracy, administrative efficiencies and service delivery, and reduce barriers to program participation of eligible 

applicants. 

Finally, to address the aging computer infrastructure, NASWA 

was hopeful Congress will consider our administrative funding proposal that would do the following: maintain the current funding 

structure for UI administration and give States an additional discretionary appropriation of $100 million each year for IT investments to promote efficiency and better services to employers and 

workers; and in years in which 50 percent of FUTA revenue exceeds the amount that would be allocated under the current system, generally in better economic times, provide States with an additional amount for UI administrative investments distributed via 

a formula. 

Thank you for the opportunity to testify. 

Chairman DAVIS. Thank you very much. 

[The statement of Mr. Gates follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
76 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.048

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wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.053

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wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.056

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.don'"'"'''''''''' I" II>< '1lIO"-'II"~' Mal<> ><ld<,I ""''''' S 1!I!l mlil" .. t>ftho" ."", III""" '" ,100 r ....... 1 """'" r,... otj", •• i.""""""fUI ,n 100'1."",""" ,,,,,,, <l«1~ '" . ..... , 51J5 mill''''' '" 1<)10. portly t-<u ... "f ... ,c IN<lget <u', i. "'""",,,"' ,h. ,«<".;;,.n. 

NASW" "'1" 11-...· r.d-... I ¥o,,'",",~o' ,,, ."'"'" .... 'rodenl 1\0lil, , ... 1""1'" """ <IT",,,"", .. .,,"i ...... ;.'" of.,. .. 

.. <mpioy',,"'" " ......... ". (un p«>gnlIn, br B~"'"''''' "M .... ' .. "' k." j<l """"., "r r«k .. 1 \in""ph.<~'''''" t -r .. , "" 

(ru fA I "" .. "" """ ..... od in ,t\<. p'.""",,, ,., )""' (0< """" .... """" for ""lT1in; .. ""~." U",~ ,hi. iOM><'W<h ,,,.:1'<: 

",,"iJ 11<. "".'OW'< M d'«t<li<l,,",) md on"""'",,}, <p<ndl"~ ror UI o.lm'ni" ... ",·< fundl.~ _ • ....".. '" uOO<r <u,,""' I." 

ICooLonf"'>"Y runding i> m,R<Ia.ory '\mdiog "",hun,,"<1 "odof .pprorri .. ion, ",,11-.) , 
85 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.057

... , , ......... tmn,n' I>\\'. f""alllil " 'ooIJ II< ' lII"Of'ri."od fo._ fhnd,n,- a!><v.·.·boa .. f......t,,,,>ndo,,,""ng<n<y f.ndmt In 

. dd',;"" '" """"n' I.ow, !'<'f.,..,..."<,, '1\UfI"" ."..,.h ~0Il1.! "'~'''' "fI ,~Slll!1 m,II"" 'Q ... ,'" th., .~.-.l 

""""",ble 1<"01, of II"rfom,.""" ..... ..,,,, ""''''un" ><1 in SiaL< o..li" $<f"k. rl>", ISQSP,I. 

lb,.1 UI Admini<u.,..., r"""i"~ .....,,,'<1 '" ... ,," fox • r,..,.. 1 year "nul.! h<: ,,., h1tJo<. of''''' foil"" '''11' 

11111>< $<I .. oflO I ...... f".,.J ng .(~ I.I>(J <>-ha .. fund;"~ . (<I ClKo'i"lr-""') f",,~;.,& . nJ 1~11"'Tr."tn ""< i .. ""i •• 

• ,,-.n4.or 

(l) ~O 1>"""<1" ,,(ruT'" ",,~ .. 'o"otl<d [n ,he 1"«"""" '., l'<"" 

/'1<"< m.tWo,"') r..,dills "uI,IJ ,~"'". ~r,.., <X"'" if 'ny. of ~ """,0'" vr~u, '" ,.. •.• ""< <')11«"", in 'he pn"""'''' '" 

)"" " ... ,"" f"nd"" "' ..... '"" ... ,n "r (01. (b), (OlolWl (d) .I!<II.. (,,"""""" hl<oly .. wid <>«W" in ) .... " "'h"" 

",,<mpI<>YlllcM .. 10" 1>«,.", "h ... """"n-.ytntn' it hlAh. ""ne",lIy W (l<t«tJ' fur" ","'.",,"",,'kel<ol in ,"" 1"" K'"' 

"., )"''' " 'oold II< In.' ... '~"" 1M . ,,"' "f(o), (b).I<) .. Io! ,dl ~bo\. ", 

n .... < .... if, oIY ..... ""'~ II< • .......d;.,.,.y <"",k_ "' ">I,,, .,oJ J"',,","<! '" " .... .. 101 .. ,,, •. (I) 5!1 p<f<n\' h.>«.l, ........ h • ..." nf,I>o,' ""., <>1',"" f.",, ;ow ,1/IIl<', (. ). (~) , (.) """ (d) ob",,,,: .,' I:!.! ~ 1'<"""' boa ... •• "" " ... ,h""'" Or~,< "'lima' .... HIT" "'''"fl''' <olk,,' .... J.'IIIS , ... Pf"' . ....., .. , )·a. poiJ 

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" .... mh... ~fI",* """";",,,.bout 'h< ""SW" .~""nl""'",. fun.lrnB ~I ... ,', I><rn .. k«l. ~",b ... , 

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e".i""'m<lI~ 0/1 .. ,; _ "'1) likd), 

(2) 110, .. m ... ·h ~""W ,'" " .. " r"",,;"~ "",,1 nor. f,ondillll "'~"d II< ... i ..... r. ... 1)' <lu' i"" 1I<'.'Il, "I' I,,,,," 

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"", ,,(t"" 21 ~ " ..... ". '~<'" """"' ......... i.l«1 . Th< "".,,"1 0>-«<>;. """"., oollOIl "ooM boa" 

":uiN in (\"' .. 'I: )" '" kt .. """ "bou, $'10 ,.ill;"" and '0 II.:a,I) S2!O mill~"" 

,J) l1o .. • ... '.""d ''''''''' be ", .. m! 'n II", e"""",,,,,,,,,,.1 OuOS<1 jlI'<>Oh." H", "",~I d.'><'<.m <I<., ... ·;'h 1\It 

r. •• n<inB <>fib< )'n>p<lU1 . C~'" cwlJ bo <", ....... ,,·r"'i .... """"ploy"""" i""".""" .. ron" bill o. , I.,~ .. 

.. oj".. "",,,,,,,i'i"i,,,, 1»11 ~1"""~<> in Sp<ndin~ "',.. .. "''''' "',.., <I<'<n ...... ''''~ ", "'"'" "''''' ... .. _ 

) II,,,, "",Id new ,nand.",,,, 'lI<'oJ"'1 b< " .... ,.il') C","i"ll<""1 , ..... '111' 01",,"), ... ,"""do,,,,,, sp<n<!;"lI Il.>r 

lIT'''' '0 "It ... Ib< UI ""'",n;,.,..,,,,,, '" 'wrurri"j,,,,,, ,"11< " KI ,,,. 11<>\' iUndln¥ Il.>r RE"IKES ;0 "" .... ,"1<)' 'ro<""'Of. "" """' .. '" .ta,~ b.a<cd "" tho II,,",M M EUe <1"10"''''' .... "",., i •. "'.....,.. KEA. 

IS) Dvt> 111< 1"_' ..... <"'r'o)'ff"'PI"'"'1 Yo>, UWC •• jI1""~ "'''''''t! .. in~''mpln)'<rj i. ,n.: UI ~)' .. m 

'''1'1''"'' ''''' , .... "',,,. "' ~ .. ".,e; .j", """,'<I fun<!rnt . , i.'I"'" i"~ ''''' ."<J;rily Q( ,bo U( """".0" "hio~ 

<h<y,"'""d. 

We \""1"'<' Ih<- S""'"",,mi,,« ~ iU h,,< olh...-'!,."" ....... "bou' ''''' NASWA po\'!lO>.l. N"SW" M. 1""'.nllO '.'~i"l! 

fon ..... "'~" ,h •• "",,.,,,. ,>.t\o. )'''''' """"'81.1<." .. ,\It ""y """"''''''0 .. m"" III ,.,jm,.i .... ',, ef".di"~"" .. h><'ll 

N"SW" .0.",,,,,,,, h"" ''''ON' <un""'''. ~nd ''''" ","pIO)"", """'""', 11 i, , .... ,",Iy id<. """"""y In p"'~ ,h ... ",,1,1 

. 11." " t< Lh. u ...... t\O"'iOI.,r'ho i) ,",''''~) ,t>< r< <"" S .... """.", .. ~ ""r "'" ''''<> Iml""" < tt><ir UI """""""" t,,,hm>IoI:Y",,olOlhe,.),, .. m;, 

St.''''''· '''''I;Ilh'lJ ,,, ""''' 'n' ...... ''''i. Ii( """'l"''''' '". "f""!,-"f"",, .flki< ~ ""''''''' ... LII\d I"'''''''' Rf.A E.~ for "" '..,,,1 ~."'n" ! I ) Thoy ,,",e .. ,~ It< )" "'; the f«irnol ~o"<m",<.' "",,,.,f,,"d, ... ,< 1(./3"" f".. UI .oIlnini.troll ... : III RE" 

fun,J;"~ r .......... f'A/KfO"!.' ( ... " UC ~ ... 'Il' ~ pro,ro\td 'v . 11"" .. """.,.,.......~, II< ''''y "",,_',m, f"IWl;~~ 

pro~i<kd "'m"i!II,IIfIP"""""1 bWli'<1 ""II"'~" (SIlR.); \3 , RIS ("ndin~ bas h=I lim;,<d, ... ",,,,,,in ,,,,. <phoOO ic.! 1><>1 , 

O\1U 14) !~A.'"",·.dJ"" .,) n,"d",~ iOr.,"plll)O'n\, ..... k .. ",,01<. ,he WIlYI<"' r<)'O<'\'A .. or.d ,II< \\'ull<~""e ,,,.'<><"'''', 

" 
86 

f 

Chairman DAVIS. Mr. Temple, you are recognized for 5 minutes. 

STATEMENT OF LARRY TEMPLE, EXECUTIVE DIRECTOR, 

TEXAS WORKFORCE COMMISSION 

Mr. TEMPLE. Thank you. 

Good morning, Chairman Davis and Ranking Member Doggett, 

distinguished Members of the Committee, Congressman Brady. 

Thank you for inviting me to testify on the implementation of the 

Middle Class Tax Relief and Job Creation Act. 

As we have talked about in previous testimony, Texas prioritized 

the UI claimant population as its number one population to serve 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.058
87 

in a State, second only to vets, in 2003 by actually self-imposing 

a 10-week reemployment measurement for UI claimants. This isn’t 

a Federal measure, this isn’t a State legislative measure; this is 

one that we put upon ourselves. 

When we put this in place in 2003, our unemployment rate was 

about 6.4 percent. Our performance was around 27 percent of the 

claimants were going to work within 10 weeks. During the—before 

the downturn in the recession, we had gotten up to 64 percent. I 

am happy to report now that last year we were able to get back 

up to 50 percent, and it continues to grow. Ten weeks is great; 

eleven, twelve or thirteen is certainly better than sixteen, twenty 

and twenty-six. So the Middle Class Tax Relief and Job Act supports what we are already doing. 

Another example of how Texas has made this population a priority is the legislature in 2009 created the Texas Back to Work 

Program, putting general revenue into our appropriation. I am 

happy to report that to date, in less than 2 years, we have had over 

25,000 placements with over 4,000 participating employers. Twothirds of the employers participating have employees of 100 or less. 

The average wage replacement before the individual became on UI, 

we are able to statewide 96.8 percent replacement rate of those 

wages. We have been able to reduce on average, including Statefunded benefits as well as EUC, shorten the weeks by 9.01 weeks 

of UI. And after the cost of the $2,000 incentive and the roughly 

$200 per to administer, it is still $596 cheaper on average than the 

total cost of benefits for those who did not go through the program. 

This is not only saving State trust fund dollars, this is saving Federal EUC dollars as well. And in addition, 15 percent of the people 

that we serve in this program are exhaustees, so we are not only 

serving those who were on UI, but we are also serving the longterm unemployed. 

As you are aware, and we talked about it earlier, the testimony 

earlier, the REA/RES services, Texas is under way with that implementation. To date, through our system of local workforce boards, 

we have outreached 28,000 individuals in the first—just the first 

4 weeks. We expect this to be about 7,000 individuals per week 

through the end of August, which will total about a little over 

160,000. 

Our first day of outreach was Monday, and we got the report yesterday. We had a—unfortunately we had a 53 percent no-show rate 

for the first day of the three of our boards that reported the performance. Those people will be held ineligible for that week. We 

will have to outreach them again. And I bring that up because as 

the way that we are funded, the $85 per claimant, we are only 

funded for those people who show up. So States are going to have 

some unreimbursed expenses to this degree, and we are trying to 

work through that. 

The one thing that complicates this, we will be hiring an additional 225 staff on a temporary basis to help us administer this 

program, but our infrastructure was woefully inadequate to be able 

to fund this, this outreach, this quick, and we didn’t have it in 

place. A year ago we had about 250 offices around the State. We 

have 220 today. These offices, Employment Services as well as UnVerDate Mar 15 2010 08:09 Oct 28, 2013 Jkt 078665 PO 00000 Frm 00091 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78665.XXX 78665

wwoods2 on DSK499XVN1PROD with WAYS & MEANS
88 

employment Insurance Administration, the vets program and those 

others, are funded through FUTA taxes paid by employers. 

Over the last 10 years Texas—Texas is a donor State; we get 

about 35 cents on the dollar. Over the last 10 years, Texas has contributed $5.2 billion into that system, and it received $2 billion 

back, and that is after paying back our loans. So we don’t believe 

this money is falling from Heaven; it is money that we are sending 

to D.C., and we are not getting our return. And it is part of the 

issues that Darrell Gates talked about would get some more parity 

into the funding to States, particularly donor States like Texas. 

I want to talk a little bit about the waiver process. We did submit a waiver. Very quickly, we thought we had met the criteria set 

out in the act that said what a complete application would be. And 

we are now reviewing those requirements under the guidance, and 

one of the things that will—just as an example, regardless of what 

your benefit amount is, everyone represents a $2,000 hiring incentive. Under the guidance as we read it so far, and we are still reading it, we will have to have an individual reimbursement for each 

individual person depending upon their benefit amount. And we 

are looking at serving—I estimated 33,000 to 35,000 people per. 

That is not the most business friendly—— 

Chairman DAVIS. Your time is expired. Thank you very much. 

I appreciate your passion. 

[The statement of Mr. Temple follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
89 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.059

Testimony of 

Larry Temple, 

Executive Director 

Texas Workforce Commission 

House Ways and Means 

Subcommittee on Human Resources 

"Moving from Unemployment Checks to Paychecks: 

Implementing Recent Reforms" 

April 25, 2012 
90 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.060

Good mf)mio£, Chairman Davis. Ran~ing Mcmb.:r Ooggcu und distingui~hcd nll'mhers Qfth ... 

Commiuee. Th~n~ you for inviting me to ~tify (»llh" iml11emeJluuionofthe MiddleCIa.ss Ta.~ 

Relief &. Joh Cremi()f\ Act 

A;; I ha\'c blatC"\l in [lI"el'iol\s testimony. Te ~as prioriti7.c5 lh~ UI clnimnnt population in its 

rlXlnp!oyment cffons. TheCommi.sion fOlll1aliz(d this priority in 2l)l)3 and !iClf-imprn;ed" 

rct:mploymcnl mcaslITc for ut clnil11m\1.'I within I U ",cd;s; Ihii is nOI a ledcrnl or SlOt.:: mnndntcd 

targct. Prior to .::~toblishing this fonn~llIIrgct and the introduction ofncll' toolS and policies. 

(X!rformun~ "'as rOl,ghly 27,.. but climb.:d 10 a high 01'(04% hd'm.' uhscqu~ntly dropping" ilh 

the onset of the recession. 

Despite 3 slow lXonomic !\.ocowty Bnd Te~as hoving secn the unemp loyment fIlte hil OWr 8% 

Ihis ps'l y~a , we conlinue III connect UI clainmnls 10 work. The IO-w...,k pcrfornl3nc~ tOrgCI 

has e>cccdcd 50"10 in the pasl year. II is imponanlto rccug"i~~ that willie Dur l:loaJ is 

re~mploymcut wilhin 10 wl.ocks. going b~~k tQ work in II, 12, or 13 \\'.,.,ks. is glill \!oelkr than 

rc..:mploymrm in 16, 2n. or 26 weeks. 

As further Cl'idene~ orlhe Slale's eomm;lmenllo gcl\;ug UI claima!)IS hack (0 work, the Tcxas 

Lcgisl~tutc in 2009, created 3ltiring incclltivc initimivc, the TI.""~a~ Oack to Wurk (TBTW) 

Program. Th;s pmgrnm is wh,,( we hw;l-d our aprlication Oil for the Depanlllcnl of Labor's 

(DOL) dCntOllSIJ"luiul1 proje~1 outlin~'d in this Act. I am plc~scd (U sh~re Ihe Jill1o",ing results: 

o.'Ct 2S,IIOU placl"n'lents 

o.·cr 4,000 cmpiDYm. participating,. owr!/3 Qr pJllicipaliog ~mpioycrs ha,'e 100 

cmploYl'CS or less 

Awr~l!c "'ag~ R'placcmml ()r%.~% 

TfHW rlaccmenlt"ndcd 10 ...,due" benefits ul;lited by \Ull weeks On a'C"T"Jgc (Slale and 

Federal) 

A T13TW pl uccment i~ S~9b cllcaperol1 i "er;(1,\1."" 1I1.1n Ihc total benefit cost for a similar 

claimant who wa" not rl~cl.""d 

As you are aWare. Ihe Middle Class Ta~ Rdid' & Job Cremion Act included u nUITlber of 

prlll'i;;iOllS ailH~'d al gelling Emergency Unemployment C(llllpenSlltion (EUq elaintunts back 10 

"ork. Specif\cally. Ihe ACI requires stales to provide Rttmploymcnt EligIbility AS5istancc 

(REA) and Reemployment Services (KES) to EUC claimants thnt enter iHlo Ticr I benefits Or 

Ir:msilion fro", Tier 110 Tier 2 on Or aller Mat"Ch 23, 2012. 

Thi5 indud<:s four SIi:J'S: t>r;'"ll13IiOn 10 tl,,· ser.'il"<.'S 3vsiloble through Worl;.force Solutions 

Oflic<.!S. labor markel and ear.....:r information. asscssment orthc EUC claimant's skJlls and inI"'TSon r"vi~w of the claimanl'~ c()Iltinucd eligibility for EUe. indud,n!:! 3 review urlhe 

ela;"'!l.nl·S most r\. .... -en! work scareh lo&- Th~, !if!;1 Ihree sleps oflh;s requirement Can be don~ in 

groups. by ph<)Ilc. or via """binar, bllllhc founh step wil l require each individ""l daimanl to 

CU1]1e imo a worl:force c"nlcr and nK"" face-Io·face with employment counsdors. The T~)<8~ 

Wl)rl;forcc COll11ni iulI will hire an additional 225 ~t ~IT;1I order 10 ewcule this provision Oflh" 

ACI. 
91 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.061

LJuilding I>n al> in1<'i;.r'JIM $y~lem 8dmini~ cred thr{)Ugb a nelwllrk of28 LUC31 Workfotte Iklanl,. 

we. have b\:nCfitl'il from our i:,~i~tinJ> opl'l'llti"ual relatiom;hip Iwtw~-en the Boards 3nd (fur 

unemploymem scrvic~. Thi~ infnlstructur~ has ~now~d U!i to build upon I pr(J(:~ already in 

place to ~dminister the REA·RES provisions. Although Texas has the ~nefit ofhaviuJ;~n 

integrated S}'l;t~m. and Te.us·s unemployment ratl' is below the MatiQllal avcMlgc. thl'I'C will still 

be chalkng~ tu uur ~.llc m, 

As I staled. thu provision l'CQuires in-pcrwn reemplu~menl services, !\Icaning 

Ih\.' claimants th,tI ,,'c olltN:nch \\'i]l halt to come into one of our 120 One-Stop centers. We ha~e 

al"'~dy conduct .. "t.l ootreaeh to 2~.OOO EUC claimanlS in just the flISt four wC'CU uf 

implementation. TWC cstill1at~s appro.xitnat~ y 7.000 EUC tlaimllnts pcr wcek willlw 

O\Itreaehed Qut of 161,[)0fl claimants betwet:n nQw and the cnd of Aug~t. In SUUle case'S, o,,~­

Stqps are preparin!; to Ie'" JII :ldditiun~1 1.000 clai",a"ts "alk throu l,;b the doors in jusl a Sillil-le 

"..""k. 

Bl"'"USIl stat...,. only gel reimbursed f\lr Ihos"cluimants "ho actually ",spond tu IJUlr ..... eh. there 

will be unfunded C''''IS associated with iml)l~mentation. For Qamplc, out ofth .. finot group of 

cia,mants sc ~dul~d Ii" sc",k~s • .'il% did not fl."porl Hnd must bccontactcd i);ain. St"ff im~ and 

CO£I III genemtc lists of claimants snd £ending outn:ach lelle", will nlll be r~"'Cul"'rnlc-d unles .. the 

cI~imDnt comd in for sCf\'ic~.,;. 

The l!lC!ti infr9~truetlln: to scrw th~ unemployed is ",~r(lily inalk-quate. A pori ion of Ftd~mi 

Um'l11plo)'m~nl TIL\ Act (FUTA) dollars paid by Tc.as employ~rs funds r~gular Empillymcn! 

Serv;cc:i' {ESJ_ Unfl)r\u!)atciy, TC;\lI$ i,.. a dotlUI' state in the Federal Unemplo}llIe", Insu,..m"" 

Sy~te"" receivinG unly 35 cenlS 01\ Ihe dollar in relurn from FUTA taxes paid by en\)1lo)""Ili_ 

The,-r is Bn nfl"C!31ion for Te_,as and olhl'f donor states to admini~ter pro);ffim. without prior 

in\'cSlm~nt in 10;:-..1 infrastructure t/l I' rolid~ the "'so"""-s III offset those CO'l~. 

AnOlh~ r challenge I would lih 10 bring 10 your Dlle",ion i~ the guidance prov\ded by lhe 

[)(;partment of Labor (DOLI lOr Ihe implemenlation ofLhis Act For cxamrle. implem.·ntatilln 

0/\ Ih .. nn~mpluymcnt ilL,urW1C~ side fur imposing a s:mctilln ofa pc-riod ufineligibilily for not 

p.1rticipating in the REA·RES is 1111 MOp,"" ineligib,lity" (lntil the individua l participalc.~ , tet on 

the ",,,rkfllrc"C sid". the impo,ition ofa sanclion N I period ofincli);ibility is just une \\~'1:k. This 

iii a prlm~ e~ampleofthc disconnecl und ac~ ofulldcrs!~nd[n!l within DOL ol"holll contrndktinll 

policies impacl the impicmentatlon ufprogl'3ms at lh,·locallcl'el. and ronlmry to supporting an 

integrated system ul"scrvicedciil'cry. 

In clming, I wnuld li~e to bri~ny address Te~as·s ~pplic3tion for a dcmonstration proje..:t undcr 

S~-.:tion 211)2. Te~~s submitted a wallcr Rpplieation on Fcbro~ry 24. 2011 00:;ed on tile criteria 

for ~ complete ~pplication as IQid out in Ihis section ufthe A<:l. On Mllr.:h 17, DOL 1k1li<'d our 

~)lIlIiC1lt un stDting that we WQult! have to wait un f.'<!ernl gllid:mc~ fN the application proce;;~. 

On April 19.2012. DOL issue<:! guidance un how sm~s should apply fur a wai~cr. We wen: 

dioapjl<lint~ h~t th<' guidance 8p[l<:3ri \(> go b<'),(md whal we bt-li .... -e is required by ll>~ 

ksi~lation. The l~gjsjD ion SCI OUt a ~imple pmcess in about four (4) plIl,(<'S ofbi\llangual,(e. yet 
92 

f 

Chairman DAVIS. Mr. Vroman. 

STATEMENT OF WAYNE VROMAN, PH.D., SENIOR FELLOW, THE 

URBAN INSTITUTE 

Mr. VROMAN. Thank you, Chairman Davis, Representative Doggett, other committee members. 

I have submitted a written record, which I will refer to for certain of my comments. However, the one aspect of the Middle Class 

Tax Relief and Job Creation Act that I do want to single out for 

particular attention is the provisions related to short-time compensation; that is, allowing employers to reduce weekly hours for 

a large segment of their workforce, and allow those people on short 

hours to collect partial weekly unemployment benefits. Half a billion dollars was set aside for this. It is an innovative, forward-looking part of the legislation which will be useful not in this economic 

recovery so much as in the front edge of the next recession, because 

the utilization by employers of this particular feature happens most 

intensely as the economy is going into a recession, employers are 

not certain about what their employment prospects are, they don’t 

want to sever workers, so they try to keep them on, and short-time 

compensation allows this to happen. After the extent of the downturn is more obvious, then employers are able to make better decisions regarding separation versus bringing people back to full-time 

work. Having this included in the recent legislation is a very strong 

and positive aspect of that legislation. 

Now, I will move to the bulk of my remarks, which focus on the 

situation in the trust funds and the situation of the benefit payments in helping to stabilize the economy. 

Four factors contributed to the loss of trust fund reserves in the 

States. It has already been pointed out $41 billion is owed to the 

Treasury and an additional $5 billion in the private market. There 

were low reserves going in, uniquely low compared to all the previous postwar recessions. It is obvious to say the recession has been 

deep and long, and it is still persisting with an unemployment rate 

above 8 percent 4 years after things started to get worse. The timing in 2008 affected revenue in 2009, because the recession really 

started to bite in the last half of the year. And continuing low employment is continuing to keep UI revenues below what they would 

be if the economy had gone through a recession with the more 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.062
93 

usual V shape as opposed to the long trough shape that the current 

one has. 

The UI system has responded very strongly. It paid out a little over $30 billion in 2007. In 2009 and 2010, it paid out over $120 

billion. That is a quadrupling of the total amount of support payments. It helped prevent poverty from rising, it supported many 

families, and it continues to do that even into this year. The written statement has estimates of how much the economy was stabilized as a consequence of those added payments. 

Looking to the future I would make four comments. First of all, 

for future solvency of the State trust funds, the most important single thing that could be done is to have the States operate with an 

indexed taxable wage base. Since the mid-1980s, 16 States have operated continuously with indexation; only 6 of those States have 

borrowed in the current recession. In contrast, for the 35 jurisdictions that are not indexed, 29 have borrowed, or over 80 percent. 

So indexation is strongly associated with improved trust fund solvency, and it is something that the Congress should encourage the 

States to operate with. 

The funding problem in unemployment insurance rate now in the 

regular program is most serious in the biggest States. Mr. 

McDermott, your State is unique among the 20 largest in the country. The only State that hasn’t borrowed among the top 20 in size 

is Washington State, and that is partly because Washington has 

followed a consistent policy of restoring its trust fund after recessions and bringing the reserves back up. 

Any proposal to provide relief to States that have trust fund deficits, however, must recognize that many other States have operated responsibly through this recession. States like South Dakota, 

there was a representative from Tennessee here, New Hampshire, 

as well as Washington have not had to borrow or have had to borrow only very limited amounts because of their prudent trust fund 

policies. 

The final point I would make is that borrowing in the private 

market is not a panacea. There is about $5 billion outstanding 

right now. The States are going to have to pay that money back, 

just like they are going to have to pay the debts owed to the Treasury. So any relief to the States should include some kind of reward 

for the States that have operated prudently as well as providing 

partial relief to the States with indebtedness if that is the direction 

the Congress chooses to go in. 

Thank you very much. 

Chairman DAVIS. I thank you very much. 

[The statement of Mr. Vroman follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
94 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.063

Unemploymcnl Insurance I'~rf(')ml~n(."{: 

and Tn.;:;1 Fund RCMorJI;on 

Sialemeniof 

Dr. Wayne Vroman 

TIle lJ ballIJl~ iWle' 

Before Ihe Suocommim"e on I~ulllan Resonrc~"S 

oflhe (:om111;II~e()n wlIY~ and Mt'"~n~ 

U.S. Hou,;c of RCpn:scnlHli"es 

Apri12S.20 12 

Cha;nnan DJvis, Rankin!! Mtlnbcr Dog!;e\(. and m~mlx:rs oflh<" S"l>commilli.'C, (hank YIlY for 

Ihc 0pf!l'lnun;ly In appear here hlduy. As SIOICS change Ihcir lIllcmploymcnllnsurtlncc (Ul) 

proJlfilm~ in rCSplll1Stl W .... 'Celll kglslallon. il is imponanl lo n.'COl!nilt hal~lales also facc grcal 

chollcngC"S in linnncing Iheir UI prO!!r.1Ill$. 

The Grcal R .... ·"ss;on of2007..{)9 and ils ancnnalh polSC tilt llIost s<:rious ch~llcnge \(J UI 

fi nnncing since Ihc51aIC programs wcre found~d in Ihe mld·1930s. To help flnunce bel1cfit 

paymcl1ls in Ihc rcgular UI programs. stalc-linanccd progmnls Ih~1 pay up 10 26 wccks of 

bcflefil~ in mo:<l ~Wles" 36 oflh(" 53 "s 3Ie~'" have borrowc<i fromlhc Unilcd SI~ICS Tr.:~sury 

siIWe 200S. Th<' number of statcs oorruwing and Ihe rclalivC)silC Ilfthc lo."IS h~,,\."" lx.'Cn Jarllcr 

Ihan in any previou;; n:ccs,iOll. As of April 17.2012.311 SlnlC pmgmms have mjl~1:Inding 

Treasury loons Illlalinl,\ S41.S billion wilh 1111 addilillnal 55.0 bdl,on owed in Ihe privale sccu";li~'S 

IHarke!. s. .. v~n ~leprogr..m> (l\\oe m<lrc Ihnn 52.0 billinn. led by Califomia with it (kbl ofSIO.S 

billion, Evcn irlhe reeo"cry cuUl;nuc.s at a slrOnllll<ICC for Ihe ~c",1 live years, ulany orllur 

biggesl ;;IUI~S willlihly o\\'e >ubsl~ntilll amOUIlIS p~SI 2015. A rt"Ccss;on lal~r in Ihi~ dccnde 

would only add 10 Sla1<: IruSI lund indebledncss. 

l\1y remarks IWY focu~ on Ihr\."Cqucstions: (n l'l<lw did Ihis large lru~t fund dcm~ <vme 

al;)(.)\](? (2) HOI\" have UJ lx."\Jetil paynl\.""nlS p<.'rfonncd since Ihe ons<:1 oflhe G1"C"JI Recession" (3) 

How callll iinandng crisis witll larg~ UI lrus) fLlnd Ikhl~ be IIvoid<:d in II future r«e>s;"n? 

' Th< .;~"'. ""r~;n "',\ "'.1 .. ,,,,,>1.,,, l"""'nr...,~utItQr ...... shou ld not br .",ihu, .. -d ,,, "'eUrb.m IM"'U'O. JI!-

"", ........ Of 11. fuodo",. 

' Th< 5l",0 tlt. SO '''In pi ... II", lJi,,"<. ofColwnbl&. Pu,""" RIco. -.nd til< Yi't!;n I,w-.d. 
95 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.064

The Origins of the Current SitUlltion 

The scale Qf~latc Ui lrusl fund i\\dcbIL..JIl"'Sl' rcllccll> thc combill<'d cn"ccll> of lour identifiable 

fuctor!.. 'rhl'Se ~n' low pre-ret'ession n'S<'I"I'C balances. the unusu~1 depth and duratirm orthe 

=I.'$ion_ Ihe timin!! of the do .... nlurn, and thc con li"uin ~ loss of employmClI1 ~nd associaled lJl 

illS I,,,'enues from Ihe r«($5ion and Ih~ !ltowreeovery. The fjr.;t 1 .... 0 faclor.; ~'" responsible for 

the l'I"g<"l1 pan of cum:nl indchlcdn~~s, but Ihe final 1 .... 0 1m,,, also ct>n1rihulcd 10 Ihe lOsS ofln"l 

fund reserves. Each will be discussed briefly. 

Low f'w-Reccssion Rue,,''''' 

Ch~rt I diiiplays aggregale Ye'Jt-cnd Ut f~rw rnt;os tn~ !"CS<'fVt',; as a p..-rtcntage UfhJl31 

~o"crcd payroll) from I96U \0) 2(1 11. Th~ .... scr\'e mlio cOMist"nt)' c::\cccdcd 2.0 percenl or 

Ilayroll before 1973. while it hm Iwwr "'ached 2.0 pcn."\:JH since Ihell. Three carly periods of 

C'Conomic rcrol'<."I)' wc .... lI«ompanlcd by largc-sCIllc tnlSI Fund build-ups (1961--ti9. 1976-79. 

and 1983- 891. OCIWC'CII )983 ar,d 1989. Ihe .<'SCrve ralio iQcfc.I.'cd from -0.47 p..-rce)l\ 10 1.92 

percent. Laler rcro"cry jXriod., had milch smaller rescn'c ralio iflCrcU;;CS, Thib I11ClIl1tlllal Ihe 

JlfC-R'.:e.ss;on r<!Si:r\"l> ralio w~ lo .... (-r;n 200 1 Illsn it had ~<'f1 in 19H'I and ~"en lower at Ihe ~nd 

0('2007 Ihan in 2001. The r"';~rv" r,I;O "'a5 0.79 jXrCC/l! urp~yroll in (k~~mb<'T 2007, Ihe luw~'"S1 

cver for " I'r~_=<'S~ion yearc) 

CharI I. Ull'fognlll Rese r-'f Ih llu, 1%0-201 I 

t960 1965 1910 1915 1980 198~ 1990 1995 1000 200~20081011 

-~"'" Rorie · Ne. ~~~ ~, P~rcent of Povroll . Oe<;, JI 

Soo,~: n,,, on ""'~I"'·ti .nd '01<11 p.oymll U!<d in tl>¢<oIo"I>ljoo".,. ""'" 1."Off",. "fU~''''rl,)~menl 

1 .... rJIICe 0('''. U.S, flqw'''''''\Qrl .. bof. 
96 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.065

N(lte in ~h3n I Ih3tthe pa~tthree J' ~3rs are In~ (lnly peri od whcnllot re,er\,es "en' 

ncgal ivc for Ihrrt consecnlh'c ~e:trS. Ihsed (In rc"Ce~lt devdopmenls, it appears net raer"e>; arc 

Ijltcl ~ to ll.'main ncg:alj\, ~ for three or four mort' years, The final >t"Clion ofthi!; k."l;m011Y 

discu.s..'S meas ure'S 10 1i)s I~r rdc,",'c al.'i:lIm"l alio ns in lhe' Sl aies. 

How low were Ul ttust fund re!>Cr\'O.'S at the end 0[1007'1 A common meaSure of UI 

rescrlc adequaoy is the rcsm'c mtio mt,lliplc. or RR.'.I (nlso cal led Ihe hillh cml ,nultiplc or 

I teM., Thc RRM is measurt'd lIS a ralio of two mt;lIS. 11.c !lUln.·nuor is Ihe rescrve ralio, 

reserl'cs as percenlage of payroll- I hat is, the series depicted in Chart I. The dcnf'mi",uor is the 

hi~hcsi previous all"ual bc 'lctil payout ralC. also e)(prc$sl.'d as a Jl'.'fCenla~C llf payrolL II was 2.22 

percent durin!? Janu~I)'·Ottemb..T 1975, Thus, tlw RRM at the end of2007 was (J.:)f,. Many hay~ 

suuested lhSi 3 pre.n."Cc ~sio n RRM of 1.0 (n-prc:;cntiol! 12 ",onlhs of bend lis) i~ ~"~lc .... ll y an 

dequat~ level. Aggregate nel re!ier.es h"lla(w SJIoU billi.)O althe ~nd of2U07. hUllhe a,>«:iatw 

RRM of on(y 0.36 ",e~"tthDlthe "'''''rI'C' "'p,,,,,entl..:! only 4.3 months ofbcnefits when pBid at 

lh~ highes1·CWT paYOUI rJtt. 

Thcexplanuli(\i1 filr low re~c,."ts be!,)rc IheGresl RC<:CSsion lies mDiuly in the failu"': of 

UI t3;1; re"c~lue 10 r.:.slo"" truSI fund b~lances fonowing Ihe rc<:cssi')IlS of (i}9( and 200 1 and nQl 

Ihe clfc.:l1i orunllsu3liy high ben~fil payonl mil!> durin\; Ihe ('!90s and 2()()();;.' While bt:ndll 

payoUI Me. bct"'e~~. 1990 ~l1d 2008 were 10'" relali ~c 10 earlier period._ Ulla ~ rewnues w,'rc 

~"Cn iow~r. Icading 10 the long-run dccfCasc in lruSI fund rescrlc ad~'quQey. The t~ Ut 

programs entered Ihe Greal RccessiOll wilh hislorically low trusl fund rcs..'f\'es. 

IhcJ)c~l!lLcc~.ion 

Th~ '''Ce_<5'oll lhal co'mnc''''-... ..J in Nove",~r 20m WlIS the dec!",,>t and !ougest (If lhe L~1\irc postWorld War (I ""rio<l. (lclw.:.en 2001 and 2009. the national unemplo~me'1ll r:lle doubled frtlm .6 

f"'rcem to 93 per •. :en\. It lhen ;ncrt'3SW In 9.6 ""reenl ;0 20 1() and has re",.illl..:! hi~ . ave",!!i"!! 

8.9 pt'rcent durin g 20 11 and 8.3 percent during the r.""llhree months of rhi ~ y,,"'r. 

Uncmpl"yment s,·c .... gcd 14.8 million in 2010 and 13.7 ",ill ion in 201 1; il has rcnmined BOO ~ 

12.5 million dUTin~ January-March 20 11. Associaled with in"rca~ unemploymenllllls bc~n an 

in~TI:asl" in 8W .. ~g~ (mean) un employment dUr:lI;On. which ~a~: hcd the Unpl«e..:!cnted k'vels or 

, On< ""''''''f} oflhc pa" .. ,wof UII:>.-!>.!its .. 1Il '''''' r", !i'e-year r«1<><1. O)"ooint. N,k tn 'h~ 19W$ I.~, til in 

WaJ'''' v""" .... "iJnemplQj'noe.' I".u .. """,: (:.ff"'~ VI<lbI.,n • • ,>d P.,." r ..... J'«l< ... U"""p!"},m.", 10I>ur:>0<. lIr",rN ... 2 (W .. h;~gI<ln. 1'lC: N""nn.] A<adomy "f."""i, II .. ",.....,o. !QI11_ 

, 
97 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.066

14.4 "eeks I~ 2009. 33.0 weeks in 2il1U, lind 39.3 w .. d.:s i~ 2\111. (lefore Ih .. Greal i{eCl'l'sl(>n. 

mean durnllon had r~ached 20.0 w~..,ki jusl once, In 1983. 

The GI"t."lII RecesSion. "ilh it~ hl!;h unumplQymcnt and long unemployment durmiun. 

caused a large mcreaSC in UI ~nd;1 payments. Tahle I ~ummanzc'S annual unc ploym~nt amI 

Ull)I,nefilS fmm 2007 10 2011. The paym""ls d3Ll1 d,st,ngui,h regular Ul ~nefits from 

Emergency Unemployment Cllmpt:"ns~tio n (EUe). Fe<lcm -S1~le Es.lcndetl Bcn<.'!;IS (EB). and 

Fed;...,.1 Addiliunal Compensalion (F AC'). FAC' made paymcn\s ofS2S 11 'H'I:~ 10 all UI rex;p;cnIS 

durinll m,lS! of2009 nnd 20lU hill ,,'as pha~'(i oul In lal~ 2\)10. 

s.c'cral feature/; of Table I are nmcwonhy. UI was ~sillnlxlto be: a count~ll:yclic~1 

progr.lm. 1Imlille lable v;vil1ly l lluslr.1lc$ its cyclical respo.msivcllcs •. Dl,,;ng: 200'} and 201 O. 100ai 

UI be:ndils (induding paym~nl.l; 10 th ... long-lcrn, unemployed) wc:rc four limes 10Ial bcl)dit,s uf 

2007. Total benefit> during 2011 were Ihree limes Ihe 2007 total. All four paymenl, idenlified;n 

Ih ... lable oontribllled 10 Ihese inC"'8"'s. I)w-in); 2010 and 2011. r,aymL~'IS Irom Ihe IWO eXlcnd .. 'Il 

benefil pri)grtllU; tEUC and Ell) ,,~c<'l:ded r~gu)ar UI "'-'nefits jor Ihe <)f!ly time in the history (If 

""t~onded I:>cnefil prolV"dms. NOle 31,0 thai Ell and FAC paid lar£c 8monnl~ during 2!lO,) and 

20 10. jh~e benefil p:tyn1<'nls hclpo.."<i stabilile the il1come~ ufmillilll!5 (If American families and 

are cunlinuin~ to do ~u Ihis }c:U-. 

T&ble l. Unemploym~~l1 and Annual UllJcn~fLt>.1007 11 

Un<mploy- RCBulor UI EUe Ftdol"3l- TOIIIl u r 

m~ol Benefits Iknd.lS S"'IC En "c O'"f\Cfol:i 

""7 7.' 32.4 "." 32A 

200~ ••• 43.1 7.' "." SUI 

""" 14.3 7&.8 .j2J ,." ,.> 136.6 

2010 14.8 S~ 6 "'.0 92 10.1 14HI 

2011 Ll.7 47.1 47.1 10.0 104.4 

s"u" .. ", An" .. I.loI~ rrom ~ u.s. r)':pJH"'''''1 MI.aOOr. U"<mplo)mc·"" from the [Ju .... " ofl ... 1MIf St4 i~io;,. ' nJ 

.... mpi<ly""'''' boI".fit. f",m ,1>0 OffiCI' of Un"nlpl")""ICt,, I" ... , .. ICC. 

N<ih''' n''''r'''~''mI II. mill",,,. of proPIt, n..,.,fit P>l"""''' In billion< of dQU ...... 

The fLroncing ofl>'guloT UJ ~ne!it~ i~ lhe res~mibility of the ~IJI~ pm\!rtIms. 'The $78.8 

lJilliQn paid in 2009 '""1" ,-sented !.O'J pe",em uf payTOn. While the ~()()'! I'~YQIII nue w~ high 

(Ih" highest sine~ 1982). an"u~1 paYOUI rates nbl)\'~ 1.69 ~nl occurred dllftn\! fI,,.. earlier 

r~c"s.';'ons (194'), 1958. 1%1. 1'175, and 1982). The high payOU15 of 2008-11 have caused 36 of 

53 stat~ UI pro!;rams 10 oorrow som~time during the past tQur yL-:lr5. LlQrrowing from the Unil.'d 

• 
98 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.067

SM~> ~a~ulY i$ well estnbllsned; seven..,r lI>!>re StUt~s ha\'~ oorrowed in e,'ery ~essiOn sine;, 

the mid-I97Os. with much bighet numbers durin~ 1975- 77 and !98(}--&3. 

The third and f<lunh fa~lol'li (Ihe timing oflhe downlurn and continuin» low"mployment 

during Ihc economic ,cc"vcry) have both nCJ;'ltiwly am,cted Ultax re\cnuc_ While cad, i~ Ics., 

impOnanllhan Ihe low pn.<-r.,,·cl'sioo truSI fund;; all<! Ihc ,.,,'erily oflhe 1"l'C~'"$Si()ll. both ha~e had 

mcasumble e!n'cIS On stDtc Ul ln.S\ fund baIDr>et:$ .. nd the "olumc OrboTTOI'I ing. 

Ihe...Il!!ting oflhe Downlurn 

MilSt SUles sct Ull,,-,("S for th., upi:oming call'ndm y~ar bascd un tm.1 fund r""tn·Cs 4. of Jun~ 

30. Net n.'l;l'rl'CS lin June 30 arc usually similar 10 l'I."Scrvc. allhc cnd oflhe year. hul nul in 2008. 

BC<:illise Ul P"l'om! inCTf:3se.J ~harply durin,g the ;econd halfof2008[ronghly 510 billion mare 

than in Ihe second h~lfof2007). th., cm!·of-y<'ar bala!\co in 2008 was S10.7 billion low~.,. Ihan il 

had bj,en six mrmths e:.rlier (52'!.O ,etsll5 S39.7 billirlO). Thus, employer.; in m()s1 State.-. "~'r"C 

lax~'d al 101'l'cr r'Jl<'$ dorinl!-2009 because \ '<1)' link of the 1:nc·2008 surg~ in benefils entered thc 

cuitulnliOlls lhpl dctcnnincd Iheir !1109 taS" roucs. 

h9~' P92:~l'\:l'S§io1! E!l!l'lQ}1I1Ull 

The fOltnh factor, contim.linillow cmploymcnt, has aflccted UI III.\" rc"cnuecvcrj YCM since 

200R. Coverc'ti employmem in till' decade befon: the recession ;;rew 1.1 pcrcCfl! 11 year. If tsublc 

c<J\'cred emp)oYlUcnr had ;;rown by 1.0 pen:em a year alkr 20117, It "ould have n:ached 11 0.B 

million in 2010. ,\ CIU3) emploYI11~nt WI;; Q9.5 mii!i,m in 2010, a shurtfall uf 10 pt'rl'cnt. The 

employment shortfall has been prc..",nt e\"Cry year since 211(l~, and It willpcrsi;;1 to.- sever.1 futtirc' 

yC'~r;. The depressin),! err""t on UI tu revcn~ dunng 2009.2010. and 201 I ha, al'cmg~d moll.' 

than S3 .0 billion 0 year. 

Thc comt>incd eflc~'ls orthcsc rour facturs caused 3 large-scale drdwdown ufreser.cs in 

ncarly Il stat .. 'S lUld prompted borrow1l1g from the U.S. Trtas:ury by most Ul prOgm,M. 11l<; 

conllucncc urlhe four can be charJctcri~.'d as a pt'ff<.'Ctslorm in their elTccl5 01\ Ultrust funds. 

VI Beoefits in the Great Rcression 

The benefit payments from all tiers "rUJ prognms as summBri,cd in table I have JlCrform~d 3n 

important ·stabili;t.ing function for thc' ovcralll:\.'Qnomy. The hc...,fllS ~IStI hclpcd dampen lb~ 

incrcn.sc in poverty stemming from higher unemployment. 

, 
99 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.068

During 20()9 and 1010. I dir~ted a lood.+bascrl analysis oftne slobili~ing dl~'CI~ of the 

UI progr..m,' The analysis lIs.::d the Moody's Ec{)non1y.com cconon"'tric model to 3.'.c'$s urs 

"ffect on the lim,· paths Q[t'e;11 GDP and employm~1tt. Thr an~lysi~ USN $tate·l~vcl detail un 

regular UI bo:nelits. <1)!nbim,d EUC and EB bo:nctil'l. and $t3te Ulta.,es to lrncc 811~mativc time 

Jl'lth, <)fTC31 GOP and employment ";111 emllilasi .. Qn the (l<.'riod frum July 1008 10 June 1010. 

Four lindin~ from that analysis can bo: lIigJdi!:hled: the increased "'!lular UI benclits 

eI(l~ about one·tenth (0. I 05) oftht· rcal GOI' shonfall cau!;e!l by Ihe r~'Ccssion; <'~u'n<k'd 

b'.'Ilclit~ (ElJCplll~ EHJ d<1S<-'<.l aOOut M,,·twelfth ((LOSS) ofthe re~1 GOP shonfHI1: b<:C311$(,> there 

was very 1;111" respons.;: of .... l!ul3r UI taKcs durinJ; 2009 and 2010, thero was pr3clically no 

on'so.1tlng tax·relat~-d elTc<:ts: and th e mliitipli~'t cn;"1 un real GOI' for each dollar ofadd<.xI 

n'lwlar UI bendits "'lts 2.0 lim <'J(1\:ndcd benelils it was al.,., 2.0). WhClI all paIlS orthc analysi~ 

&Ji!combined, the effc~t ofUl in cI~ing the GO" gap ~~u.>Cd by the ri.'l:cssion w~s 0. 183 during 

th\." e ight cali:nd~r '1uanrn; between July 2008 and JLlII~ 2010. 

Table 2 uses Ih~ multipliers from th3t t3rlier nnalysis and benefit dats from Tnbl~ I \0 

cslimmc lhe stimulative effects ofU I on real GOP dnriTilltlw Greal Recession. Column 4 shows 

the increa.<.t: in bene'lits abfM' 2(lm wilh bencl1ts measured in n:al lcnns (d(')llars o r 2005 

purcha~ing po'wr). Column 5 show~ Ihe c((t:\:1S on rcal GDI' assuming a multiplicr of 2.0 for 

both regular and extended UI benelilS. Duriny 20()7. real GDP was SI J.228 billion. From 

cQlumn 5, the. ~timulatiw dT.""t ofUI bcnelib during both 1009 ~nd 2010 l',U't:edl-d I ,4 pt:rel~lI 

<~f",al GDf', and it ~~cc",dcd (L91",rccnt in 201 L Applying !hi. mc!hodulog.v in 2011 ~ntail s 

mQre uncertainties. but it might SUb~~st ~n increment tQ rcal GDP of 0.5 percent. with aboul half 

due to t11~ continu~d pnymcnt {)fe.\tend~d b,,,,cIiK Altcm3ti,'e models and allematlvc ana lytic 

approach ... would yield dim.'n'nl point l ... tin1~tcs tu those in tahle 2, butthc' conl'lus;on that 01 

benel;t. h~d a me"surable \."fTc't:t in le..s;.,nint Ihe recessidn',I . ...,,"cr'ty is widely hdd.~ 

The inlTt.'3~c in UI b<:nclits durin!:, the Gn.·at Rl'C<'Ssiun a!Tcctcd poverty. cs(K'Cia lJy 

amon~ hrlUsehold, with long·lenn unemploym~ "t . Usin1l2OO') Iltmily ,nwllle d3t~ from the 

Current Pupulation SlIrwy, the Congressiolla l Budllct Ollit'c leBO) found tim the n31ional 

1J{l\'erly ntti!of 14.3 percent in 20U'I woold haV<.' been 15A percent absent UI bcnelitS. Among 

) W.yn. Vrom,o. "'I'I,t okQrU"" ~pl<»"'''''' l!\SUr""" •••• n !l.u,o,n .. k S"~;h '~, l)"iinS . R ......... i""," fiT!l.UI' 

~OIf>.IU (W".'IIg"'" DC: U.s. Ikpanl""'" oft..b"., EmpIOY,,","1 lind T" .. ni"l! Ad"".i01ra""". Z{I\V). 

'S .. M," till_de; ood ,\l>;t :z.o"dl. "!low Ih. G",.t R«....wn " ... I1,,'"Il."' 10 on End"l"';"".'''''. N!: »"M<lon 

11 ... , .... '1) . !lei"""."'! or I:.ro! ... ,.,o,. 20t OJ. 11,. ClIO', ONI)'''' Qrtlle "'" .. "" .. , Rec<>Wr}' "~ R<II",,,,,",e., !l.<t 

IS., ~~.<bo.M'" 1l~11~"VJo<I J2!i OJ,~)-i\RR!\ cl!: 

• 
100 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.069

!umilics with ~on.e- un~mploym""t. VI !>ellen\); ,educed lhe Jm,eny 1'lI1~ from 24.3 p"rcenl l<1 

19.6 pe ~~nl in 2(1(J9. Among families wilh unemploymenl and ,eceiving. UI benelllJ;. th~ poveny 

nlte of 11 percenlth,1l yt'll. would hay,: bt.~n 21 percent absent UI i);:ncllLS. Amon!; Ih,'laneT 

smull. CBO found lIml Ul hocndits 't!pr\: ~m(:d 5 per~~"'1 .. fliunUy ncolll~ wh~" unemployment 

duralion w~> 1- 13 wc~ks bUI 22 pt'rc~nlof income when unemploymelll dUl1IljOll was 21 w~eks 

or longer. The c ao onalysis also fOLrnd UI had large dTcel~ in r.:ducini'- eXlreme P<l"cny. 

ddirn:d 10 be incumc less Ih~n halfrhc povcny Ihrcslmld. 

bl~ 2. Esrinmed ff('cl~ of Increa~d UI Iknellr:; on Real GDI', 21108-2011 

GI)1' Pricc Rea l UI lnc,c.scc in I:fft!(:( 00 R""I 

rol~1 UI Deflaior a.".r.I§ Reo l Bencti15 loDP 

BcnotilS 200S - 1.00(1 11;/121 oYe'" 2007 (Moll. - 2.1l) 

'" (21 Pl '" ," 1007 J!.4 I.06J 30,S 

200~ O I,O~6 47,0 16.5 Jl,O 

'"'" 136.(> 1.~7 124.5 94.0 1~8.tJ 

!Q IO 144.0 l.l IQ 129.7 ')9.1 l~ .4 

:lOll IMA LI B 92,1 61.1; 12].2 

§;,u...,: I)ala "" UI _r.« I""" DqioI1""'" ufLatlor, ["'rl,>}'ontm and Tn""ingA,ltu,n;'lnllo"n. Offioo oJ 

WQn.furc. S"".n'), CDr """.~ trorn tl;lU' .... 1 ;""" .. t aoro"""- 1'1",..., DOl. ;n <ol.",,," L 1. 4, .nd ! on billio"."fdull." . ('01"'"10' J, ~ .• Rd S .. ".I.'t d Itt the ".,hot, 

The 10.« fr~M:fY~" in Ihe r\:!;ular Ul pN!lTB1ll during 20m ~nd 2010 u shown III chart \ 

WDS impOM~n! in i"'O"iding incOine SU[l[lOrt Il'l menl~ to million. <1f Am<'ricun farnilie, . Th~ 

c1mlltnJ::~ nOw faei"l! ta!~ Ul pNgrnms is ho, ... (<1 ",build (heir res.:rVCS- so a simllarslabililing 

pcrfUm1311<.·C CHn be r'-1Jl,.I1<'tl during Ihe nl"Xlll.'Cession. 

Rebuilding Slate UI Trust Funds 

Some imponanl faclS should be n'<:ognilcd in c<1ruridcring. policies In improve fulu", §Iale UI 

INSI fund le\'c1s, I'l"'h~ ps Ihe m<lS1 importanl inglc faci 3cfOOW Ih .,. di,'crs.e .lale programs i. Ihe 

impnr1ant f'O"i li,'", role o f lax base indeSali,,,, in fos!t:rin g !«llvency. Sin~e Ih~ mid-I '1BOs. 1 f> 

Siaies and Ih~ Virgin Islands havet'per:!led wilh an inlk:.x<,d laxable wage basco Each year. the lax 

baSI! in Ihese 1al~ S gro"s aUlomatlcally wllh Iht' growlh In stalewide "ag~. The indexation 

pc",clltagl'S (the Talio o flhc ta~ t.;,sc 10 annual wagl"S) rangc from SO JlC",cnt (Nonh Can:i linJ 

~nd Oklahoma) 10 11M) percent (!lawaii ~nd Idahn). 

, 
101 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.070

Whik Ihe UI tax bases in f\()n -illde~ed ,IJICS can be rnisffi Ih1'1)ugh stote legislotion. stall'S 

haw Ix,,,n slron!:(ly reluchml to enacl increases e,ccpl during linancial ~rises. Ewn Ihen. Ihc 

inL'Te3S,,", h~\'£: uSU111y "'->en ~rnaJi. Chan 2 vividly il1uslm~s Ihis 5ilUaliQn using d:\1& from 1970 

102012. Durinj,! lh,-se 43 ycaf'<. Ih ... federal Ullax base increased from S).OUO in 1<)701(1 57,OO!) 

in 198) and has remuinro al S7.000 $ince 1983. Chan 11hen ~h()ws lh~ ~;",plc 3\"era\>t oflhe 

lanbh: was" balk: lor Ihe 16 dcx~..J stales Dnd Ih~ 35 thaI are nul indeJlcd.' l11c 3,e~e 18~ 

bas~ furlhc )5 in 2012 is 510,68.2. k.s.s Ih111 $4,()()O alxl,c Ihe 57,000 f~dl'fallalC base. In 

cOflI,..",I, Ihc $nnple.a,·erugc Ihis year for Ihe indded s1ales is S2S,7(KI. 

" ... ~,~ 

25.000 

20.000 

[5,000 

10,000 

,,~ 

, -

>oro 1915 ,~, 2000 2004 2008 2012 

--FM .. '.ITnS ..... 

111 ... effect ofindeM.li('»l on UI linancing is clear. nle indcxro SlalC'S have Ill""h higher 

rali ~ uflhe lax base lu 8Vel"1\ge was","", hiW,cr taxable wage pnlponiorui. and h~her resc"''' ralio 

muhipl..s Ih3n nun-ind£:xed ~lall.,; .ln Occcmber 2007, lhe ~impl£: aHTlIg~, oflbe RRM~ for t~c 

1\,o flnlUP,; of SlaWS W('h, U.83 lind OAI. n.-'spccti,<'!y. Dunng lh~ G.-..m Rcc(:ss;(Jn, ani), 6 oflh£: 

16 indCXffl Slales n","(k-d Tre;!~ury lQ.1ns. tOmrar<'d wilh 19 of35 non-;nde~ed '[.1I"'S, Ind<'.x3Iion 

has dcfinilely improved Stale lrust fund solwn~y in Ihe long run, 

• 
102 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.071

During 201 I. Ih"1'~ Werr pmp0s.3.l, 10 increase llle bar.e fl>l' lIle red~ral UI t.:J~ loSI5.()(J(j 

in 2014 and i"des Ihe bas<. BOer 2014 10 the ~m"'lIl in a"crage ,,~gti! JuSllW!) "on·ind~ ,oo 

SI~les (COl1necli~ul and Rhud~ l~nd) have a la~ rn.,e ur$IS,OOO!lI mure. BL..:ausc "aeh Slale 

111"~1 ha, ~ a la, base allea.l high lIS Ih~ federal lax hasc •• n inere ...... 1(1 SIS,OUO wuuld " ,quire 

mQSI uflh .. 35 non·indc~~ st~ t~ s tUl'llisetheir bl!s...". Ifan inde.xation pmposaJ muves forward 

this year or n«Xl. COJ1!(rt'SS mi!lht consider a larger change to increase the la.,able shan:: of 

cU"ercd wag'o's. The fedC11\\ ta.x basl'ufS7,OOO in IQlll is equi'-alrol IU aboul $21,(100 in 2014. 

An increase II) 521 ,000 (m hiQ,her) ""uuld ha,'e IWO crr~ct$: increase Ul lax revenut in many 

S131es, and improve Ihe equily ufUlla.(CS by IcsseninJ!.lhe bur(k~l un Jo" wagc employers. 

A S<.>c:ond fael to recognize is thm. on a"cntc. Ihe big.;;!ates haw the most s .. :riou~ 

lundiug probl~tttS , Table 3 hdps illu$trale lhi ~ poim. The SI I'rusra",s~ have t."ell lII,tkcd by Iheir 

\:Isnblc covered employment;n 2UIO. Four feamres oftobk 3 nre nOle"pnhy. 

Firsl, Ihe larg~ state_< cnterL..J tire Gr~"1 RcceSliion lI'ilh much Ipwer reserves that OIher 

St:llf"S (Cl)lumn 1). The 10 larg<'S1 had plInitularly low reserves, bLlllhosc r~nked II I!) 20 alS>.} 

had low f~"",rv"" . All to " r lhe larg<'S1 ~lat e~ have burr",,(od, a~ hal'e 'I "fllle n"~1 10 (column 2). 

Washinglon is the only stOle among tbe top 20 thaI has nOt borrQ .... ~d. 

Second, lhe larS",1 10 stales ncooum~..J for 7U percenl of outslanding loon..- .lllle end of 

201 I. nnd Ihe largest 20 for 90 pcn'elll (coln'nn 3). Their dchts arc ~ubslami"t. e~cc.:ding 0.5 

I""'''~d !)fpayroll fq.- ~n I () "r,he la'll""t '~d1L" "nd fo< 4 uf to in 'he ll--JO ~""I' (CQlumn 4). 

T abl e J. Pre·R~celi~ion Res<.",'es and U<lffl)lI"ing. 2001\ to 2011 

Awrngo> RRM l~ s tlp'mv,';n!\ TOlal L,,""~ 

Dl:<:cmbe,2007 2()().1l- 12 Llecembcf 2011 

St .. e Size R3nk;nk: (1) 12) (31 

I 10 lU.l 10 19.1 

11 _20 II,J~ 9 8.1 

11 - 11 0,(11 7 2.9 

32-41 ~J 5 1.1 

42-51 1),68 4 0.4 

L\laO~ 0,5 1'<1. 

"r Payroll 

(4) 

'" , 

, 

, 

At! 51 projfl'!",., 0.36 35 ~I.S 22 

Sr>t.-ce: Cokul."o", 0,0<1. 01 'ho Utbo" t".,;,",,, .,inll d ... r, ,,,,, ,he OWl« or Uocmploym<m 1,1);"""'0(:, 

~<>!tt R!(\b"",';n'pl ... '... <> of'<"'<.~"'1 ~e,...';~ ","I"pl"'_ Loo"-,~ , .... _'"~'n .mlo"-'"rdoll .... 

• 1'1 .. U"""'ploy","'" In ...... "". 5<> 1'0""._ I.e' of!l)l I (S3~/LIS1_ A" .. ;."", .",I)'''j by 'n" GIIQ .1 .... "",,,,,,,,,...-.doJ 

'ndo.,,,,.Il ,he IJI '" boO'. See U.s. (iu".'MI<II' "o"' .. nl.~ilil~ om,,". "Un."'rloy'~.", 1" .. "."".1""" VUlIM" R"""" G"'O·1lJ...l40 W..,h'"~'01\. (X', liAO. 211101_ 

• ,,=,,' fti'" and ,lie V;,W" (,I.,>IIs on' .... ,,,,,Iudod, 

, 
103 

f 

Chairman DAVIS. Mr. Holmes, you are recognized for 5 minutes. 

STATEMENT OF DOUGLAS J. HOLMES, PRESIDENT, UWC–STRATEGIC SERVICES ON UNEMPLOYMENT AND WORKERS’ 

COMPENSATION 

Mr. HOLMES. Chairman Davis, Ranking Member Doggett and 

Members of the Subcommittee, thank you for the opportunity to 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.072
104 

testify this morning. I am Doug Holmes, president of UWC Strategic Services on Unemployment and Workers’ Compensation. 

We recently joined with 36 national and State business associations to send a letter to Secretary of Labor Solis requesting that 

the Secretary repeal current Federal regulations and develop new 

regulations consistent with the able to work, available to work and 

actively seeking work requirements included in the Middle Class 

Tax Relief and Job Creation Act of 2012. I have attached a copy 

of that letter to my testimony. 

It is the claimant’s responsibility to show that the claimant is 

meeting the requirements of able, available and actively seeking 

work. There is no authority to permit a claimant to restrict his or 

her efforts to a period less than an entire week and still be paid 

unemployment compensation for that week. The State UI agency 

has a duty not to make payment for a week without first determining that these requirements have been met. The claimant must 

show that he or she is actively seeking work without applying his 

or her own subjective evaluation of work that is, quote, ‘‘suitable.’’ 

One regulation in particular illustrates the inconsistency between current regulations and the act. 20 CFR 604.5(h) provides 

that, quote, ‘‘the requirement that an individual be available for 

work does not require an active search for work on the part of the 

individual.’’ The plain language of the act is clear that individuals 

must be actively seeking work. 

With respect to short-time compensation, employers ask what is 

meant by Section 2163 with respect to the temporary Federal funding provision. There is a provision that provides that any shorttime compensation plan entered into by an employer must provide 

that the employer will pay the State an amount equal to one-half 

of the amount of short-time compensation paid under such a plan. 

How will the amount to be paid by the employer be determined? 

We don’t have any instruction on this yet. When is it due? Will the 

payment be considered contributions for purposes of State UI Trust 

Fund balances, repayment of Title XII loans and other purposes of 

the UI program? All questions that still remain to be addressed by 

instructions from the Department of Labor. 

With respect to drug testing, Section 2105 of the act provides 

that States are not prohibited from enacting legislation that provides for testing of applicants for unemployment compensation for 

the unlawful use of controlled substances. If a State elects to enact 

such a provision, it should be developed in collaboration with employers, particularly those who already include drug testing as part 

of the hiring process. To be most effective, State-administered or 

supervised testing should be developed to meet proven standards 

upon which employers may rely in hiring decisions. 

With respect to reemployment services and REA, the act in Section 2142 provides increased funding for reemployment and eligibility assessment activities, and these have been shown to be effective. We would suggest, however, as I believe Mr. Gates indicated, 

that many of the enhanced methods that are included for EUC 

claimants should be addressed as part of serving regular UI claimants. They would be most effective if provided early. 

Reemployment efforts should be coordinated with community resources as well as with staffing agencies and employers generally 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
105 

in the private sector. State agencies should be permitted to use the 

full range of electronic communication devices to address the inperson contacts. Person-to-person video, as well as audio contact, is 

increasingly available and should be used to reach a larger number 

of individual claimants at lower cost to the individual and lower 

administrative costs. 

Thank you very much for the opportunity, Mr. Chairman. 

Chairman DAVIS. Thank you, Mr. Holmes. 

[The statement of Mr. Holmes follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
106 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.073

Testimony of Douglas J. Holmes 

President. UWC- Strategic Services on Unemployment & 

Workers' Compensation 

Before the 

Subcommittee 011 Human Resollrces 

Committee on Ways and Means 

United States House of Representati ves 

Hearing on Moving from Unemployment Checks to 

Paychecks: Implementing Recent Refonns 

April 25, 201 2 

uwc· lr~leg c Scr\'kc~ un Un~mph)ytntlll & Wurkcu' Compensation 

910 !7'~ Sireet, NW. Suile 315. WJ5hingu,m, O.c, 21J01)(; 

Pll(lne (202) 223·8904 Fax (202) 783- 16 16 www.U CSt1"ll1~'Y.llrg 

Chainnan DJvis, R~nking Mcmbt!r Oogg~lI. and m~mbcrs {)t"thc Sut)l:ommilwe on 

Human Resources. thank you f,'r th~ opportunity 10 testify on efforts to move from 
107 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.074

unenlployment checks to p~ychecks, p<lrticul~ rl y with ref",reuce to ull"'lIlploymellt 

insumnce reform ~5 enacted in the Middle CI~ss- Tax Relief lind Job CreDtioll Act of2012 

(Thc Act) that was ,ign ... d i11lo Jaw by I'resident Obama on February :22, lOI 2. 

I tim Dougl~s J, I-lohnes, President of UWC- Slmtegic Services on Unemployment & 

Workers' Compensation IUWCI, UWC counts as membt.'1'S 3 broad mnge of large and 

snJall busille~~'5, tr:lde asSOCiations.. sc(Vicc companies fl'Qll1 the Unc,uploymenl 

In;uronce (UI) industry, third pUrty adl11inistrnlors, and unemploymcntla1( pmfessiolluls. 

The organi~ation Imees ils roots b3l'k 10 I Sl33 at the lime when ullemployment insurance 

was iil'Sl b.::ing eonside r"d for enaClment, 

We ree",ntly join",d wjlh 36 l131ioll31 and sl:lte business associations inlel'cj;ted in 

uncmployment insurance refonn in d~livcring a 1~1h.'1' 10 Seerctmy of Labor Solis 

requesting thallhe Sl'crewry repeal ~1Iffi'nt fedcml regulmiolls:1I 20 CFR 6()4 ~nd to 

develop new rcgulutiolls consislCnl with the able to work. available to work and actively 

seekins work rc<Jui"cll1cn~ l1d"d~.-l in lh~ Act, J hal'c al11lch~d a copy oflhc 1cucr 10 my 

te~limoI1Y· 

Thl" Act included a serics ofill1portant rcfonns in the unemployment illsurnncc program 

that require ~hangc~ ill fedcralregl.llation .• and poli~y as well :IS ch~nges;n SWtc statute, 

niles and administrntive policy, 

Of particular importilnce is the ~doJlti{)n ul' clear standards in Ihe Act requiriug Ih(,! Iate 

law$ require that individuals b<: able to I,ork, available to wurk nnd actively !leeking 

work, Section 21 Q I oflhe ACI (Hlds a requirenl<:n! to be mel by states in ord ... r to receive 

federnl funding for the mtministrnlion o flhe UI federnl/stme progrnm, Seclion 303(a) of 

th" !:joelal SIX'urity Reqllires that 

(a) T he SecrNaryof Lllbllr h~1I mwke no cerlifkalion for I'a ym~ ntlo any af~ 

lll es~ he find ~ Ihwl the law of such Stille, ~pprowd by the St"e rt"tary of 

Labor under tht FL'dcrlll llcrnplu~' rn nt T9~ Ac t, indudH prOl lo ,, ~ ror_ 

(12) A requirement Ihal as a eOl1di.!iOIl of eligibility fo r regular cumpensation 

for any w~k. a claimant must be ahle to work. 81'wiloble 10 wurl;. and 

aeli,'ely ~cckin g work, 

The new f"d"rnl statute requires that Ihis apply to ""e<>ks beginning aft.:'r the end of the 

Jir,1 scssioll oflh~ Stal ... legisla!ul'l: which begins after the d,lIe of coal'tmenl ofllte Act 

(Fcbruary 21, 2011), For those slaLes currently in legislative sessions beginning before 

F~bnJ3ry 22, 2012 tlte time period to enaet changes il) ,lfIte law eJl.tl.'nds Ihrough the 

currellll egislalive session and lhrough Ihe fulJowing legi~lative scssiol1 providing 

suflici",nt timt' 10 develop the. required. eh~ngcs in law. For thoS<' stales witlt legislative 

sessions beginning in 1013 the lime frnmc mBy be shorter, 

The fcdl.'ml sta tutory language is a simple ~p es.sion of some of the basic tenets of the 

federal/state ulll.'mploymem insura,lCc program 35 it was original ly enacted, Howel'er, 
108 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.075

unlillh~ e!JJclrnCnl ofthc Act, Ihere Wall no specific federal slalulory requirement Ih"t 

stales or the federal govemrncnl ndlllinisler lhe progmmlo mcctlhese specific federnl 

rt'quircmcnlS. Inswad, the US D"panment of Labor adopted policy in d~tenl1ioing 

" 'hether an indil'ldu31 is unemployed so as to be eligible to be paid uncmploymt'nt 

compensation, based on wht'ther the individual was p.:!nicipJting io the workforce. 

This pOlicy guideline, although in k:eepiog wit~ the UI pro);.l1Im polj~y. ovn lime has 

beeo modified with respect to federal requiremeol:'illod Ihe implementation of Slale law. 

to pennil indi"idu~ls in l'ertain circumstancl.'S to be dl.'cml.'d abll.' to won.: despil~ bI.'ing ill 

or disabled, 10 be deemed availablt' 10 work while restricting their availability. and to be 

pennitte<110 limit their se3rch for work white continuing to c13im unemploym~rll 

compensmion. 

New r'1:u lrllions a nd policy s hnutd ecngni e the fnll uwing !loinls in developing nl'W 

regula tions. 

I. The new Hhle 10 work. ava ila hle 10 wnrk and ne th'e!y sl'Cking work 

requirements are conditions or an indh'idual be ing eligible to be pa id 

unemployment compensation; the rcspoosibility io proYidiog intiJrmalion upon 

whirh a st~te UI agency may conclude thallhe cluimanl is mCCling these 

reqllircment~ rests with Ihl.' cla;l11mll. 

2. The payme nl for II week of unemployment req uires that the able to wo,·k. 

II va iJ~bl e to .mrk und aclil'ely sfl'king wurk requirements upply to the entire 

WCi'k being claimed; there is no authority IIJltk'r I,hieh 10 p.'rmit a daimaol to 

restrict his or her ability. aY~ilability or acti"t sC3rch fix 1I'0rk In a period less 

than Ihe entire \l'cek. 

3. IUI~ UI ~g ncies e without uuthllriry to make I'llyments to indh 'iduuls with 

respect to ",eeks of unemilloyment compensation cllliml'll if Ihere is 

insufficient d ocoment ation ulwn which to conclude tha t Ihe indiVidual mC(>\$ 

all ufthl'se requircmenlS: lI1t'" agency has a duty not tn make pa)'m~m (lfa week 

without there first b.'jng a dl.'tenTtlnl1tion tlml addresS('s these isslle~. 

4 T he US DOL payml'nt " ",'hell dUl'" regulations und perrnrmHnce measures 

hould apply from the poilll in time- th at the a gency makC!l a determination 

wilh respect to a ",eek, and not wIth respect to the e nding d ate of II wl'Ck 

cllIinll'd; the current US DOL performance mcasul'\'S prioritize speed of paymem 

o\'cr quality of delennin3tion 3nd inlt'grity. 

5. The "suita ble" work d cfinit inn. is nOI a redera lly required limller un thc .~ 

for ",-hich a n indiYidua l must make hinlsclf or hcnelf \" bl e as H cOlldition 

or recei\'ing unemployment eompcn tilln ; the individual must show ,hal he or 

she is ~va.ilable 10 ac.'cpl work the individual is c3p~blc of pcrfonning without 

applying his 0\1'11 subjective I.'Y31U31ion of work tlml he or shl.' may flUd "suitable·'. 
109 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.076

6. The new anwndrnelllJ lu St~lioll J03{1I) of lhe Social St-curity Act with 

respect to the able. anilallie and acth'el)' seel; ing work re1luiremcnls must be 

rcud ill c(ll1junction wilh n istlng Ilr(lvisioos in SeNiun J 03{a) a nd new 

amendments addressing short-lime compensation and self emploYRlent 

IIssiSlance. 

Tire Ul program i$ desigucd to provide lcmpordl'y panial wage replaccrn.:nr for 

individuals who be<:onre uncmrliJy~d through no fDUll oFtheir own in connL'Ction wilh 

their work IlfId who nre ~ble tn work, av~i\ahle to wor\( Dnd ~ctively seeking work. 

Delcrminations reQuired "eroTe 3 paymen! m3Y be made includ~ I) a dClcrminalion that 

the individual h~d sunicienl employment to mC~'1thc st:ltC TL"quiremenrs wilh rcSPCCI to 

workfor,e unachmcnl (e.g. wuges paid and/or weeks worh-d) (]urillg II OOSC pi:riod. 2) the 

reason for becoming uncrnployl'(] is not disqualifying under lhe 3pplicabk state law, and 

3) ifth(>. individual otherwise 1lIC<'IS the requirenu.' ntto l'sllIblish l'ligibility 10 be paid for 

weeks of unemployment during a benefit year, Ihlll the individuul mUSI be able 10 work, 

available to work. and activciy sl"t:king work. Thcre $holild be no "waiver' oflhe'sl' 

rcquir<'lIIcnrs_ IrISlead. there s hould be II determination oflhe 1Il<'lhod usetlto assure thai 

claimant; meclthe reqUirelll elllS. Clear standards 5Ctth~ appropriate lone fur Ihl' pmgmm 

and establish and muill1uin integrity for the Ul trust fund. 

hl .n work 

The current k'd<'rnl regulations should IJt, am<'nded to me\'llhe new stalutory requiremenl 

thai an individual be able 10 work as II condilinn ofbeiny paid ullernp!o)'mtnt 

compt:nsation for II week or I\ecks. 

20 CFR W4.3(b) currell1ly provides Ih31 whether an individunl is able 10 wor\( "must be 

tested by determining whether Ihe individu31 is om:ring services for which 3 labor markcl 

exists. This requirclllenl does not mean Ihal job vacancies IIlll.;;1 exist. only lhat, at a 

minimum, Ihe type o f services the individual is able and aViljl;\bl~ to perf(lrm is gen~mlly 

pcrform~d in Ihe b bor murkl'!. The Slate must dctcrmin ~ the geogmphie'al SC'ope oflhe 

labor market for 8n individualundcr its UC law" 

This prol'ision is inconsistent with the IIl'W SI31utory provision in thaI il limits Ihl' ability 

requir<'11Icnllo a dClcrminalion oflhe services thatlhe i(ldividual is "om'ring" Hnd Ihe 

geogr~ph ical scupe oflhe labor /1l;lrk<,1. This definition pcnnirs individuals to 

subjt.'Clivcly delt'Tmine the work Ihatlhey arc able to perfoml, and TL"quires the agency to 

dClennine Ihl' geogrnphic a rea In which the ability tcst is to be appli;:,d. Intodny's labor 

markel job~ arc ~vni ab e through eJ<!clronic systems Ilnd the inlemel, and in many CIlSes 

jobs may ~ pcrfonll<'d at a localion that is rem01e fro m COIJlOr.tIC hcadq ll artc~. 

The "nbility to wor\(" under the new stulillory pnlVision is not1i111iled 10 the dai111unt's 

OWII dt'tt'rminntion of what he or she is :lblc to do or 3 dete-nnin31il)1l by Ihc $tate agl'l1cy 

about Ihe gl.'Qgmphic si:tc of the IDbor mark .. !. There should be no artilicial statutory 

geogmphic limitation ns pan o f lhe delenninalion of"ohilily 10 work" . 
110 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.077

20 CFR 604.4(a) currently provilks Ihat ""A stall" may conSider an individual 10 be able 10 

work during the week ofunemploymcni daimed if the individunl is able 10 work for nil 

or >I Iloriioll of Ihe week claimed, provided ;Iny limillltion on his or her ability to work 

does nol constilille ~ wilhdrawal from the lubor mark;;,!" 

Under thl.' nl.'w Sl3lUtory n."'Iuircm~lIt> , the dt'tcnninalion o f "ability'" is nOI based on 

whcther the mdjvidu~1 has withdrawn from the labor marli:l"1. In order to be p.lid for a 

week of unemployment 311 individual mUSI be able 10 work throughnut the week. 

20 CFR 604.4(b) currently provides thaI "if an iodividual has previously denlonstr:lte<l 

his or her ability to work and availability for work 101l0wil1g the most r~CCIl1 s~ parntion 

fnun employment, the State may consider the individual able 10 work Ihi' week of 

unemployment claimed despite the individual'5 illness or injury, unless the individual has 

refused an ofti:r of sui rob Ie work due to such illness or injury" 

This pro\'ision is ioconsistelJt with Ihe Act iothat ~IJ individll al JJ)u ~t be able to work with 

respect to a week to be eligIble to be paid for the weck. The fsetthat al some prior lime 

Ih;: indil'idu!l1 might haw ~etl :lbl ~ to wor),: or the la~tlhal!ln individual may have 

refused an offer ofsuil3bk work are irrelevant to Ihe detcnnination of ability with respl'Ct 

108 panicular \\<Ci:k. Ifan individual refuses OJI otTcr ofwor)': with rcsp..."'<'l \0 the wed. 

thaI would be an additionalre,l'ioo to deuy payntcllt as Ih~ individual could 11nl then 

maintain Ihat be or she was avaitable ror work for the week. 

A\'ailllhie 10 Wurk 

The currell! pml'isions in 20 CFR 604.3(11) are inconsiSlclI! with Ihc availability 

requirements o i' lhe nel" slatute hecause Ihe new requirement is not dt'jlCudenlOn a 

delcnninalion ofwhelhcr the individll~1 is offering services for which a labur market 

exists or Ihe g<,ogmphical scope of the availabi lity. 

20 CFR 604.5 contains a list ofspt.'Cial exceptions to the uvaibbility rcquJrern<'nt Ihal are 

inconsistent wilh the new statute. including 

I. Permits ~n indh·iduallo b~ a vailable for any work for a portion oflhe week 

claimed. prm'ided Ihal anrlimitaiion placfil hy the individual un his or her 

al'aihibilil)' docs not COllSli/ule ~ withdrawal frum Ihe lalHlr nHlrkN: 

As pl1.'viousl y discussed \~ilh I1.'S~ctlO ability, the statutc dO<!S restrietlhc determin3tion 

o flhe :wailullility requirem.:ot with ref~rence to 1\ dctemlinBlion of whether the clail1l~nt 

has wilhdrn\\'n from Ihe labor market. A statement from 3 claimam thut he or she h3s nol 

withdrawn from th.: labor market while daiming un~mplo)'ment compensation is 

irrelevant tn a determin~lion !If the a~ailabjlily issue. 

Z. Permits an Individual to limit his nr her 1I \'aIlHbilily to work which is 

"suitable" under Ihe Slule unemployment eompenn lion lull'; 
111 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.078

The new statute applies a statutory standard that ,odi\'iduals 10 be eligible to be paid for 

unemploymem compensation wilh respo:cl to ~ week must be able 10 work Ihroughout the 

week and availabk 10 work throughout the weck. The question of "suitability"' mllY be 

relevant in detcmlining whether there may be a denial ofunelupJoyment c"mP<'nsation if 

the claimant is OIhenvise eligible. bUI it iii not relevBllIlo the determination ofwhelher 

Ih~ claimant i, :\Vaibblc ror wort.:. 

3 . Pe rmits lIn indh 'idllal to meet " I" 'a il a billty" requir ... me nt!i ir he o r s he is o n 

Icmpnru ry lay ..... rr a nd is a\ il ab ".' '0 wor k. only ror thl' elllllJuycr that Illu 

por~ril y laid-off the indi\ du . 

This prov;,io!! would pennit ,m individu~l's availability and digibility for benefits to be 

dctcnnincd only wilh relcrencc to his or hcr 3\'ailabilily to work. for the employl .... that has 

tcmpomrily laid-otT the individual. Whi1 ... a claimmu maintaining lIis or lIer availability to 

work witll an lployer Ihat has temporarily laid-off the individual may reasonably avoid 

an availability issue being rniscd with respect to tllis employer. the detcnnination of 

"avai labilitY"" must be dctennincd wilh refcrcnce 10 any wor\.: Ihat may arise wilh respect 

10 the week. and not be restricted to a single employer. 

4. Pe rmits an indh 'idllui to meet uI'uiinhllity requirl'menlS (,>"f n if nOI nn lUa hle 

for work duc to ju ry ~r\" ice. 

There is no special exclUSion in Ihe ncw stalule Ihat would pennil an indi~ d"a! to meet 

the aV3 l~bili y requiremelllS by utlcndingjury duly. ,\ Ithough there may be goOO policy 

n.·aSOI15 10 eneoumge l'ilizens to panicipale in the judicial system. it is inconsistent with 

thc requirements of the SlOlute 10 pl.'mlit individuals to be paid unemploymenl 

eompo:nSlltion for weeks for which they adm ittedly Me not availnble for work. 

5. ll hibi! ~ the sta le from g UIl ml ,)' nl compcn)alion for fa ilure of 

illd il'idulIllo be 1I i1 ble to work during a we ek if. during such week. the 

indil'iilu31 ~ in 31' p ro\'ed Ira ining. 

This pro\'ision is inconsistent with tht Slmut~ as it prohibits 8 Slate from denying 

u!1employml.'nt compensation wilh rcspeC! to a week when Ihere is no question th3t Ihe 

claimant is no! available for "'ort.:. Wblle il may be rcasooabli: t"conclude that the fact 

tha1an indi~idunl is in npproved Imining duri ng a wttk nmy not itsclrmcan that the 

individual is not available for work, Ihc fact Ihal lhe individual is in training ~hould not 

be t/Je basis upon which the agency may delermine thai h~ individua l is llvailable for 

work 10 meet th~ federa l ~lUtory requirements. 

6. Th ~ availllhilily qu rcm nl in Rul e 20 604.5(d) wilh rE'5pectlo self 

mlll "l nt ll!is cc is eo nt "" jlh the pfl"' to ~ of the Act 

add res5ing n'lf Cllt pluyn'l'lIt assista nce. 
112 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.079

Th", rult: provides thaI .. /\ State mllSt nOI deny UC \0 WI individual for f~ lure 10 be 

Mtlilable for work during 8 week il: during such week, Ihe. individua l i~ participaling in n 

se!f·employml·nl assistance program. 

There is no spt.-eial provision in lite ACI 10 provide Ih31 lite nvailability requirements nre 

10 b;.> applied di fferently lor ciaimati!s undcr Self EmploymenT A~siS ancc ,SEA) 

programs. Tit", factthal 3)] im jvi u~1 is availabk tu II<: self-employed is some evidellce of 

Iti~ or hl"T ovnilability for work, but should not be per se delemlin~t \"e of Ihe Ilva ilabi lity 

issue and there is no authority in fedl'ml stallM for a ruk tl181 would prohibit a SlO te from 

denying benefits to an individual for 8 week ~imp y because th~ ind ividua l is in an SEA 

progrnm. 

7. The rul e addre)sing ShorH inlt.'" omp ti n (STC ) Is inconsis" ' nt wilh Ihe 

,\ CI 

20 CFR 604.5 provides Ihat" A Slale mUSI nOI deny UC In an ind i.·idual partieipaling in 

n ShOrl_lime compen,mion (nl~o known as work;haringl progrum under S13le UC Is\\' for 

failure \0 bcav3i lablc for work dUring a week, but ~u~h individual will be l"l'quircd to be 

avaHnble for his or her nonnal "orkweek. 

There is IIQ ~ueh prohibilion againSI denial in the Act SectiQn 2 161 (a)(5) oflhe ACI 

requireSlhsl STC employees meCl lhe avai labilily for worl!: and work seareh leSI 

requiremenls "hil" collecling short-tim" comp<:n,;:,tioll benefils, by being: 1I\'silable for 

their workwt"t!k as ""quirl-d by Ihe Stale agc llc),. However, siuee fedem! In'" wilh rcSpI."(!1 

to availability dQl's not provide f<:lr spcciailrcatmenl of UC claimants who are rCt:civing 

STC ~nd Ihe simI' UI agency is required to follnw fcdl'1":I1 !n.~ , a otic fl atly pmhibiting 

denial of UC while I'lirtic,palillg in STC is inconsiSlent wilh fl'dl'ral S13IUle. 

T he curn nlly efTel'til'l' red eral work seo rl'h regul ations a re in l' lent wilh Ihe 

sIlItIltory requil"l'me nt tha I d aimanls ~ a\'piluble to work lind atlivcly king wor k 

during a wl'ek in ordu 10 be eJigibll' 10 be pa id unemployment comllensa tion. 

20 CFR 604.5(h) provides that ''The rt~lIin:menl tha I an individual be available· lor wtlrk 

o!X:s ooll"l.."(IUir.: 3n aelive sl'ar.:h for work OIl the part oflhe individual. Stales m3)" 

howcver, require an individual 10 be aClivcly scrking work 10 be eonsidl'rcd available for 

work, or Stales may impose a separatc retjuireOlcnt ll1al the individual mUM aeti.,ciy si.'ck 

work:' 

The plain language- of the Ad is clear that individullis must be "'activdy sccking work" liS 

a condilion of being eligible for unemploymeot COlupell,atJon for allY "eek. 
113 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.080

SIiOfl Time Comllen5lllion 

A number ofst,ltes are cum:ntly con,id~ring whether to ennct !cgislntion 10 oUlhorize 

short time cOnlpellsmion (work:sh~ring) programs. and cmploycrs are reviewing the 

kdcralllnd state requirem~nts of participation. 

The Employment and Tminiug Administrntion has begun outrt'<lch efforts to e.xpl3in Ihe 

temw Qfthe lie .... · src law and induded employers in wchinars thaI ha\c. begun. 

One qUl:stion nf particular import for employers is the interpretation ofSc<:tion 2163 with 

respect tc the tempor:Jry federal financing c r shorHime comrensaticn agreements. 

Subs~"clitm (aX3) cfthis section provides thm any shcrt-time ccmpensati cn rlnn entered 

into by an empillycr must prol'ide thaI the employer wil l pay the Statt'- an amount equal to 

Que-half Qflhe amQunt ofshOTt-limc C(lmpensatiOln raid under su,h a plan. Such amQunt 

;;hall be deposited in Ihe Slaw's unemploymem fund and .hall nOI be used fOlr purposes Olf 

calculming an emplQyer's comribution rate. 

It would be hdpfull0 k:now how the IImcllni In be paid by the employer will be 

uetennin~'tl. lIhen il is due, ,Iod \>'h<.'thcr the payment, although 001 used 10 compute the 

e"peritncc rat." is ~onSide reu lQ be "conlributions" fcr purposes of slate UI truSt fuud 

balances, repayment ofTillc XII Io.lns Ilnd olh~r purpo~e;; oflhe UI program. 

ImpruI'cd Overpayment RecQ\'ery 

S~ction 2 103 Oflhc Act rt'qu;res Ihat stal~S ~shall doouct from ulI<.'mplOy01I;'01 lx'nefits 

otherwise payable to an individual an UI1l0U\1t equal to any ovcrpaymcnll1ladc to .such 

individllal under an unl.'mploymcnt benefit progmm oflhl.' Uniled $Intes or of any oth"r 

State, and nO! prev;ol~"ly recovl.'red. The amounl so dl'dueled sh~lI be paid to the 

jurisdiction under whose pmgfllill such overpaymelll was made." 

This reciprocal overpayment n.'Covcry lx'tW~-':u stnu:s was prel·iously peroli,s;ve. Many 

s\31es participated in reciprocal agreements but some did not. 'Ille effect of this new 

requiremcnl \IiI! be more erYecI;ve colleelion of O\'erpnymcllts aCll}ss Stale lines. The 

deductiQn from unemployment bene!!t, fQr previous ov~rpayml;'nlS is the primary way ill 

which states collect overpayments. Expanding this will improve Intst fund solvency and 

improve integrity. 

In order to implement Ihc new reqlliremelll guidauee aut! eoordinatioll is needed from the 

US DqXlrt1\1cnl of t abor to assisl Slates iu the developnwnt of common daLl e.~chal"!gc 

lind collection methods th~t build on the e~isli g permis,iw: systelTl~. 

Ther<' should be lime 10 mak~ th .. necessary systems and l1)C~SS changes be /ore the 

dTcclil'e d~te for this new requirement. b1l11he sooner lhe process lx'gins the bener. 
114 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.081

Dr ug Tening 

The nbuse of pre scripti 011 drugs as well as illegal controlled substllnces is II growing issue 

in the workforce. impacling performallce. resulting in dischargl' of employees Jnd 

creating a barrier for unemployed workers in meeting the requirements to be hir.::d. It also 

affecls a clllimant'5l1bility to maintain h~t he orshe is ~blc to work and availllble to 

work 10 meet the requirements of weekly ul'Il'lIIploylllclIll'ompcnsation bene lit eligibility. 

Section 2105 of the Act provides that states are nOI prohibik-d from emlcting legislalioll 

lhal provides for the lestingofapplicants for llllcmploymclIl compensation lor the 

unlawfuluSl.' of controlled substances as II condition of receiving unemployment 

cllIlIpcnsation in cCTUlin circumSI~nces. 

Administmtion of this by n srate deering such II provision should be devcloped in 

collaboration willr employers, p~rticlllar!y those who already indude drug testing as PUTt 

oftbe hiring proce$~. To be mOSI clTe<:tive, .Iale admini.t~n:J or coupcrvi.cd te,ting 

should be developed to m~T prov~n $tand8rds upon which employers lIIay rdy in hiring. 

decisions. 

Reemployment Slrategies 

The Act mcluded signiftcam new requirements for cm~rgeney unemployment 

compensaTion claimants in ord.:'r TO be paid emerg.:'ncy unemployment compensaTion. The 

requiremcnts included Ihat such claim~njs 1) Ix' able 10 wllrk, al'ail;lblc 10 work, 3ml 

a~ti\ely iR'i.·king w()rk. and:!) that "a<:tively sl't'king work" means that the daimants must 

be a) reglsler~'(l for emplOyment sef\'fc~S, b) have eOgagl...t ill im act" 'e $.<'orch for 

cmployment avoilable in light ofth~ !."mploymcill 3VlIilobk in thc labor markel. c) Tllc 

;ndividual's skills and capabilitil'l;. and d) indudcs a number of employer l'Olllaets as 

del~mlined by tllc-Slmc. 

In addition. such ciaimalllS lIIust maimoin a rccord or work S"an;h, including employers 

contacted, meThod of cOnta(:l, and when requested, pro"ide "ork search ,""cords 10 the 

S13Te agency. 

Thes!." measures illcluded in Section 2141 or tile legislation are the kinds of mea~ures that 

have been ,hown 10 be elTecti\'e in a nllmb.:'r of staTes in improving reemploymcm and 

rt'<lucing the dunl1ion of regul:lr unemployment compensatiun. 

Th.:' Act 1Io"·c\'er. lil1lit.:'d These new rcquiremcm~ only TO The long Term unemployCil 

wllC1\ ancmion is nccdcd Tu n:employmem as pan orlhe rcll" ~r unemploymenl 

compcIIS8tion syStem. 

Reduced duration of regular uncmp!oymt'nt compensation Ilot only improve~ trust fund 

sqlwncy and r .. dllees employer unemployment tax mtcs Oltl'T tim ... but it minImizes the 

imp.1ets oflong~r tenn unemployment ThaI may otherwise be The result of les[l;Cr etlorts 

early in an iudividu31 's period ofuncmploynll.'III. 
115 

f 

Chairman DAVIS. Mr. Cullen, you are recognized for 5 minutes. 

STATEMENT OF MICHAEL CULLEN, MANAGING DIRECTOR, 

ON POINT TECHNOLOGY, INC. 

Mr. CULLEN. Chairman Davis, Ranking Member Doggett and 

distinguished Members of the Committee, thank you for the opportunity to testify this morning. 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.082
116 

I am Mike Cullen, managing director of On Point Technology, a 

company focused solely on ensuring the integrity of the unemployment insurance system. Prior to joining On Point, I spent 14 years 

at the Colorado Department of Labor, serving 6 years as the State’s 

unemployment insurance program director. 

For over 15 years, On Point Technology has enabled 19 States to 

find, and collect and properly pay UI benefits. We are proud to provide software solutions to strengthen the UI program and help 

minimize employer taxes. Over the years we have helped States return over $2 billion to UI Trust Funds and the U.S. Treasury. 

To address funding, solvency and integrity issues facing the national unemployment insurance program, On Point Technology 

would like the committee to consider three recommendations: One, 

create incentives for sustainable integrity activities; two, propagate 

proven State solutions that utilize new data sharing and data 

standardization processes; and three, embrace the use of OMB’s 

recommended do not pay list by the unemployment insurance program. 

The unemployment insurance program suffers from some of the 

worst integrity performance in government. During the last 3 

years, the UI program’s improper payment rate has steadily increased from 10.3 to 12 percent. At the same time, the average 

Federal program has decreased its improper payment rate from 5.4 

to 4.7 percent. This is even more striking when contrasted with the 

private sector. For example, the credit card industry has reduced 

fraud to less than 1 percent. 

We believe that misaligned incentives serve as the primary impediment to addressing the integrity problem. Very simply, we believe Congress should allow the States to use 5 percent of any recovered overpayments to support integrity activities. This has been 

proposed in the Department of Labor’s Unemployment Compensation Integrity Act. It would produce an immediate and dramatic effect on the integrity problem. As a partner in administrating the 

UI program, States must be given the means and incentives to 

combat fraud and unemployment insurance. Washington, D.C., cannot solve this problem on its own. 

There are existing success stories, and there are reasons for 

hope. On Point Technology believes the U.S. Department of Labor 

should provide funding to take proven State solutions and aggressively replicate them throughout the country. Just last year Michigan’s unemployment insurance agency installed software that increased its collection of overpaid benefits by 79 percent. Similarly, 

the South Carolina Department of Employment and Workforce’s existing investigators completed 450 percent more audits and detected 86 percent more fraud with the new automated system. Both 

States succeeded by eliminating paper files, automating repetitive 

activities, and reducing unnecessary tasks. Each State solution was 

deployed in a matter of months; each State solution paid for itself 

in a matter of weeks. 

It is well documented by the National Association of State Workforce Agencies that 90 percent of the unemployment insurance systems are running on technology that was created before the personal computer was invented. In the past year only two of the UI 

tax and benefit systems were replaced. The pace of modernization 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
117 

is simply too slow. Last year the majority of integrity investments 

went to long-term strategic plans and multiyear development efforts. We believe Congress should direct the UI program to also invest in proven solutions that provide an immediate financial return 

to the States UI Trust Funds and the United States Treasury. 

Finally, we believe the unemployment insurance program should 

adopt the Office of Management and Budget’s call to embrace the 

do not pay list. This provides a tremendous opportunity for municipal, county, State and Federal Government agencies to exchange 

data. For example, the do not pay list can provide data on individuals who are not able and available for work for a variety of reasons, including incarceration. 

We believe a national do not pay list should be integrated into 

all UI systems. It would have a dramatic impact similar to the use 

of the National Directory of New Hires, a database that has produced a 50 percent decrease in the size of overpayments via early 

detection. Use of the do not pay list could be effective in eligibility 

determinations in addressing those determinations. 

In closing, our unemployment insurance system is a vital lifeline 

for millions of American workers. We must act to preserve the integrity of the system for those in need. Fortunately, the country is 

in a position to help strengthen the UI safety net and ease the tax 

burdens on employers across America. Aligning funding priorities 

and investing in proven solutions will return precious dollars to 

State trust funds and to the United States Treasury to ensure viability of the unemployment insurance program for generations to 

come. 

Thank you for the opportunity to testify. I am available for any 

questions you might have. 

Chairman DAVIS. Thank you very much, Mr. Cullen. 

[The statement of Mr. Cullen follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
118 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.083

STATEMENT OF MICHAEL CULLEN 

MANAGING DIRECTOR 

ON POINT TECHNOLOGY, INC. 

BEFORE THE 

COMMITTEE ON WAYS AND MEANS 

SUBCOMMITTEE ON HUMAN RESOURCES 

UNITED STATES HOUSE OF REPRESENTATIVES 

Hearing on reviewing the i[llplemenlation of the relorms to the unemployment insurance 

syslem contained in Public Law 112-96, The Middle Class Tax Relief and Job Craation 

Actof2012 

April 25. 2012 

Chairman Davis. Ranking Member Doggett. and disllnguished members of the 

committee. thank you lor the opportunity to testify this morning. I am Mike Cullen. 

Managing Director at On Point TechoolDgy. On Polnl Technoklgy's entire fOC\Js is 

Unemployment Insuraoce. and as a company we take pride in our employees' 

experience and expertise in Ihis arena, Prior to joining On Po;nl. I spent 14 years with 

the Colorado Department of Labor end Employment, serving six years as the State's 

Unemploymenllnsurance Program Director - On Point staff possess sil}1ilar 

backgrounds as career slale unemployment insurance professionals. For over 15 years, 

On Point's solutions have enabled 17 stales to fir)d arld collect improper1y paid UI 

benefits. By our estimate we have helped return over $2 billion to stale trust funds and 

the US Treasury, We are proud to provide software soll)\k,"s thai strengthen UI 

prDgrams and help mlnlmfle lax burdens on employers and now with multiple federally 

funded extensions. return improperlY paid dollars to lhe US treasury_ 

Background 

The national Unemployment Insurance program continues to face Its greatest set of 

challenges in a generation. The recesslon's impact on state and federal Ultrust fundS is 

clear and star\( as millions of unemployed continue to look for wor\( in an economy that 

struggles to regain its feet. A year ago state trust funds had been forced to borrow a 

combined $41 billion from the US Treasury. As of April 17.2012 that total has not 

decreased wilh 30 states continuing to bolTOW $41 ,5 billion. This DOL statistic doesn't 

reflect the tolal debt of the program triggered by tha most recent recession as many 

states have issued billi{)f1s of dollars in bonds to pay the US treasury. This is equal to 

paying off your credit card's high interest loan by drawing against your home equity line, 

The President's 2012 budget addresses the continuing ;r1C(ease in state borrowing; 

Hea~y borrowing from the Federal Unemployment Account (FUA) is projected to 

continue over the next lew years_ The aggregate 1000Ilbaianca il? projected to increase 

Irom $40_2 billion at the end of FY 2010 to a peak end-of-year balance of 568.3 billWm in 

FY 20t3. Up 10 40 stales are projected to borrow"_ 
119 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.084

Extended pavment 01 benefits 10 the unemployed, bankrupt lrust funds. unparalleled 

bofrowing, and unprecedented levels of improperly paid benefils means that we are 

placing the future ability of Ihe unemployment insurance program \0 act as an ecoflOmic 

stabilizer at riSk. Employers, who are struggling to keep their business anoat. are 

increasingly bearing the burden of rebuilding \tle trust funds through repetitive tax 

increases. In 2010, employers in 24 slales saw UI tax increases. In 2011 , employers In 

35 states saw UI tax increases. and it is projected Ihal by 2013 the vast majority of 

employers will face significant tax increases. Employers are now experiencing not only 

the burden of increased taxes to replenish trust funds. but to pay inlerest on the debt 

the program has accumulated. The cumulative effect of this situation is thaI employers 

are now forced 10 bear the Ullax burden ralher than use the money to create jobs. 

Over Ihe lest year, despite the focus on Improper payments. the rale of Improperly paid 

benefits has gone from 10.3% In 2009 to 11.2% in 2010 and is currently at 12.0%. II Is 

imperaUve we bring the improper payment problem under oontrol because we are 

headed in the wrong direction. 

The current outdated systems create a tension !letween timely processing 01 benefits 

and ensuring the integrity 01 these payments. However. this dilemma ultimately 

represents a lalse ct1oice. With a recurring investment in proven tect1llOlogy and 

improvements in Ihe sharing of the data within the UI program. we can both improve 

states' capacity \0 process benefits while dramatically enhancing the inlegrity of these 

paymenls. 

Administrative FundIng 

Since 1992. administrative funding lor the UI program has remained statle. State 

agencies have been required to cut service levels or compete for other stale dollars to 

administer their UI programs. During the Great Recession administrative funding was 

provided to deal with Ihe significant increase in workload resulting Irom the huge 

increase in claims volume and \0 support the administration of the federal extensions 

and federal addilional compensation. As \tle economy recovers the additional fundin9 

will begin 10 dry up and slale UI programs will return to pre-recessionary levels: levels 

barety able 10 sustain program administration. However. the identification. processing 

and colle<:\ion problem will continue if there is no additional funding 10 help pay for these 

aclivilles. Administrators' primary locus has been the payment of claims. Investments In 

improved processes, stafl hiring. aOO automation. wera designed to gst the money in 

the hands of the unemployed laster and more efficiently. Integrity has largely remained 

an under-staffed, manual activity. Post-recession lunding for integrity has not been a 

focus. 

The Middle Class Tax Relief and Job Creation Act of 2012 
120 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.085

The Middle Class Ta~ Relief and Job Creation Act of 2012 providlld lor several areas of 

specific action 6n the part of both lhe stales and the US Department of Laoor in the 

area of UI program integrity and col lections. The Act included the specific requirement 

as II condition of a stale receiving federal administrative funding for its UI program thai a 

claimanl be abJe 10 wor;,;. available to work. and actively seeking work as a condilion of 

being paid for II week of unemployment compensation. 

The requiremenl is very important oot only in codifying the basic lenel of the program 

but also as a way to avoid the trend in recent years in some states arid Tn lederal 

legislation to permit individuals to restrict their availability' for work. andlor 10 continue 

claiming unemployment compensation whIle unaveUable for work andror not actively 

seeking work.. 

The Act mandales that states partiCipate in the Interstate colledion of overpaid l?enelits, 

previously 11 voluntary election. Ttlis will require states lor the first time to work together 

to assure that tney are collecting overpayments. 

Also inciudell was the specific requirement that tna overpayment of flldel<ll additional 

compensation (FAG) be subject to collection and offset along wkh other federal 

compensation programs. A review of the appro~jmataly $20 billion in FAC payments 

during the ARRA showed uneven reporting of FAC overpayment collection efforts 

across the states and rai sed questions as to the overpayment collection efforts. By 

requiring overpayment recovery and offsel along Wilh other federal programs there will 

be an increased amount of FAC overpayment collection. 

The legislalion included the new requirement that USDOL establish an interagency worX 

group 10 develop data e)(change standards and use SUCh standards in the development 

of a rule to govern reporting under Tille III and XII of the Social Security Act. 

National Directory of New Hires 

Access 10 the National Directory of New Hires (NONH) has been available 10 stale 

worl<.force agencies since 2004. Use 01 the direclory data has been mandated since 

2007. In Unemployment Insurance Program Letter 19-11 , issued June 10, 201 I . the 

Department of Labor directed all slate UI programs begin USing NDNH cross-match 

dala no later than December 2011. This is a positi~e step forward. Our e~perience has 

been that states who use NDNH cross-matching are able to reduce the size of the 

overpayment by about 50%. It is this early detection that has the potential to bring 

significant. immediate improvement to addressing the improper payment problem. 

However. the challenge we see in relying solely on Ihe NDNH is the unkoown 

participation level by employers. We find that In states where both an NDNH crossmatch and another audit called Ihe quarterly benefit I wage cross-malch are run. each 

finds about half of the total overpayments detected around claimants who were work.ing 

while collecting UI benefits (The USOOL refers to this as a benefit year earnings 

overpayment). We believe the USDOL should rewire both audits to be run. The USDOL 
121 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.086

should also IWrk with the US Oep!lrtment of Health and Human Services, the owner 01 

the NONH, to find ways to improve employer participaiioo. State UI agencies should be 

incentivized to improve participation by employers in their states 10 make c.omplete. 

aco.arate timely report s. 

Automating the Preveotion, Detection aod Recovery of tmproper Payments 

In the past. many Federal and Stale initiati ves encourage lhe introduction 01 new and 

innovallve cross-matches. While this is certainly enc;ouraged by On Point Technology. 

we believe it represents CI misunderstanding of the current boUlenecks In the 

unemployment insurCince progrClm. Unfortunately states have too often introduced a 

new I;ross·mCllch only to (urn off or throttle back existing onas. 

Most slates still dO not hClve lhe technology to effectively handle the results of CfOSSmatches or other integrity supporting pro-cesses. During the recession, many stales 

realil:ed their integri\)' efforts would produce mass volumes of potential Improper 

payments data and therefore they simply turned many of the integrity procssses off. 

The majority 01 stCites have aulomated tools to detect improper payments then manually 

prOQ!Ss the rasulting case in'fflstigelions end adjudication. Performing call;ulalions, 

interfacing with state systems, and creating documenls for employers and claimants are 

labor intensive processes. Resolving any question regarding a case, generally reqlJires 

searching through lile cabinets to secure the required information. These manual 

processes prevented slates from addressing the overpayment problem before the 

recession and have proven impossible to ramp up with the increase in workload. 

Adapting existing lechnology to eliminate lhis paper processing will dramallcally 

increase productivity. States should store information in a web-accessible system 10 

enable automated reports, lellers, and interfaces thereby Increasing productivi\)'. Most 

states adjudicate every overpayment manually based Of) state statutes and UI case law. 

However, technology enables states to translate state law and precedents Into busfness 

rules in order to Issue automated delerminations. Using Ihese techniques we have seen 

states automate over 85% of overpaYfTlent decisions. This approach ensures 

consistency of approach and outcomes. 1\ Is our experience that implementing software 

incorporatlng these processes Improves the overall detecHon and processing of UI 

overpayments by at leasl 300%. One state has had a return on investment of more than 

100 times the original cost. We have several recent examples where lntegrj\)' software 

implementation costs hava been repaid by the detection or collec:tlon of improper 

payments in eight weeks or less. 

lmplemenl a Netlooat Effort to Combat Organized Fraud 

Orgafllzed fraud exists. States that are armed with software to lind organized fraud can 

aVQitI slgnificanllosses to their trust lunds. In June of2oo5. the U.S. Department of 

labor's Office of Inspector General testified before Congress about a single organilJ:ed 

fraud ring that stole 15.000 identities and commjlled sse million of Ul fraud. Other large 

scale cases are being routinely Investigated by the OIG. A proactive approach could 
122 

f 

Chairman DAVIS. Where I would like to go in my line of questioning is going to be under the theme of the importance of common data standards in sharing information. I appreciated Mr. 

Gates’ prescient and somewhat wry comment about the use of innovative technologies like the telephone. The ability to share information in the private sector has saved tens of billions of dollars, it has 

created millions of jobs, and the government, I found, tends to be 

a bit of a lagging indicator, particularly at the Federal level. And 

we have a habit in the Congress, certainly in the executive branch, 

of treating the symptom and not the root cause. However, symptoms can point you to those root causes, and I would like to share 

an example with you. 

In March, the Los Angeles Times reported that convicted murderer Anthony Garcia continued to collect $30,000 in unemployment benefits in checks cashed by family and friends while he 


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served time in the L.A. County jail system. Not only did his accomplices deposit the money into Garcia’s jail account, they shared it 

among fellow gang members’ accounts as well. It is unconscionable 

to think that the government is helping maintain the financial 

well-being of a gang while they are in prison for murder and for 

other crimes. 

I note that public assistance programs have worked with the 

criminal justice system in the past to make sure benefits don’t go 

to criminals. For example, the Social Security Administration was 

able to work with prisons to stop disability checks from being paid 

to inmates. I would hope we could do the same thing with unemployment benefits by sharing inmate information with public assistance programs to make sure all our programs are on the same 

page. 

In the conference report on the Middle Class Tax Relief and Job 

Creation Act, we enacted uniform data standards into TANF, Temporary Assistant to Needy Families, and unemployment insurance 

programs, so we are taking steps in that direction. 

My question is how common are cases like this? What caused the 

breakdown in this situation? What tools do unemployment benefit 

agencies like yours have to make sure that unemployment checks 

only go to those who are eligible and not to those, for example, in 

jail? Are States able to go after this money and recover it? Tell me 

in what ways and what is being done to make sure this doesn’t 

happen again. 

I have tried to make the focus of the last year and a half on this 

subcommittee to fix broken processes rather than engage in ideological discussions because I believe there is real money to be saved 

for the taxpayers there as well as assuring help for folks on the 

front lines like you. But here is my final point is what, if any, legislative authority or other tools do you need from us to prevent future episodes like this happening? 

Mr. Cullen, would you care to start? 

Mr. CULLEN. Thank you, Mr. Chairman. I appreciate those 

comments, because those are simply down the path of an area that 

we do have some expertise in. We do have the ability, and it is not 

just us, but the country has the ability to look at disparate databases, bring them together, and either through data mining or 

through cross-matches eliminate some of this activity. I am sure 

that others will agree that it is difficult to get that information 

sometimes out of other government agencies, and I think that is 

where the focus really needs to be. 

The technology is there to make best use of that information, but 

unfortunately the ability to get to that information, to get it reported on a timely basis so that programs such as unemployment 

insurance can use it either for the curtailment of benefits when 

they are not entitled to them or for making eligibility decisions at 

the very beginning so benefits never go out the door to begin with 

is where the issue is. 

So when you ask where can you help, you can help in making 

it easier for States to get that information made available to them. 

And then, again, I would like to go back to do not pay list. We 

had the opportunity to testify last year in the Senate, and this 

issue came up. And I think it is a good tool that starts the conVerDate Mar 15 2010 08:09 Oct 28, 2013 Jkt 078665 PO 00000 Frm 00127 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78665.XXX 78665

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versation of how from the Federal level, such as the National Directory of New Hires—how from the Federal level can I look at 

other information to preclude these activities from going on? 

Chairman DAVIS. Something as simple as just being able to 

have a bio from the uniform criminal registry flagged in social services for an individual who is receiving benefits if they log in. 

Mr. CULLEN. Yes, sir. 

Chairman DAVIS. I would like Mr. Gates and then Mr. Temple 

to comment from your States’ perspectives. Mr. Gates first. I know 

we don’t want to mess with Texas, but we will start with New 

Hampshire. 

Mr. GATES. I would have to say that it is very difficult, because 

I think the constant underfunding of our system has caused us to 

have to do things in technology that makes us not see our customers as often as we should. 

And so one of the things that we have tried to do is to establish 

individual relationships with each of the county corrections facilities as well as the State correctional facility, but we have to do that 

individually, and that makes it difficult. A central registry would 

be very, very effective for us to be able to make sure that individuals are not doing things that they are not supposed to be and to 

be available. 

I honestly believe that oversight is the key, and that we need to 

see our customers more often and to have the ability to do that, 

because I think that by bringing them into the one-stop and making sure that they are engaged in the work search activity is the 

best way for us to determine where to help them and to make sure 

that they are not in prison. If I call them in, and they are in prison, 

they are not going to be coming, and, you know, that is a simple 

way. 

You know, we try to do things in New Hampshire that are much 

more simple, but the difficulty that we have is having to do all of 

these individual cross-matches, and a central registry of services 

and individuals’ unavailability would be very helpful. 

Chairman DAVIS. Mr. Temple, quickly. 

Mr. TEMPLE. We do quite a few data matches. One is certainly 

with our criminal justice system. We also monitor pay phones, 

those that are coming from, for instance, correctional facilities. And 

we also monitor IP addresses, where we are seeing foreign Internet 

accounts coming in, and we do investigations on those. We have a 

big border, and we have a lot of people who go back and forth into 

Mexico, it is understandable, but we also have a lot of other ones 

that may necessarily not be legitimate, and we look into them. But 

we find people who are overseas working who know they are about 

to get laid off, offshore oil people and whatnot. So there is a lot of 

legitimate ones, but we still do find those. 

And we work a lot with the Federal Government as well. We are 

doing data matches on unemployment insurance with the U.S. 

Postal Service now, with IRS on their own employees, and it has 

been in the paper, several of those cases, where they have gotten 

criminal charges against a lot of their employees. 

Chairman DAVIS. Thank you very much. 

With that, I would like to recognize Mr. Doggett from Texas. 

Mr. DOGGETT. Thank you very much. 


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Mr. Temple, if I understand correctly, you got a waiver request 

in for demonstration projects for Texas within hours of the President signing the law permitting those demonstration projects to 

come about; is that right? 

Mr. TEMPLE. Correct. Yes, sir. 

Mr. DOGGETT. And your application was not denied on the 

basis of any deficiency, but only the fact that it got here before the 

guidance had been issued by the Department of Labor, which took 

them, what, less than 2 months to issue, right? 

Mr. TEMPLE. That is what our letter said. We—— 

Mr. DOGGETT. Right. In other words, they didn’t fault you for 

not having met this or that, but simply said, it takes us a few 

weeks to get the guidance ready. And now that they have their 

guidance out last Thursday, do you anticipate that Texas will reapply? 

Mr. TEMPLE. We are still looking at the guidance. There are 

some really burdensome requirements in it. 

Mr. DOGGETT. What would you say is the most burdensome requirement in the compliance? 

Mr. TEMPLE. At first blush the individual-by-individual calculation of weekly benefits and determining what the wage incentive, 

our subsidy, would be for each individual. We have approximately 

half a million people in the State receiving unemployment insurance; 290,000 of those are receiving State funded. We plan on serving about 35,000. So technically we could have to have a different 

agreement for every claimant with each employer where we don’t 

now. 

Mr. DOGGETT. You don’t believe you can make those calculations easily and promptly in order to reapply? 

Mr. TEMPLE. No, sir, I don’t think it can be done easily and 

promptly because it is an individual basis. And then you have to 

sell it to the employer. So I may bring a $200-a-month wage subsidy, you may bring a $500, and so we have got parity now. 

Mr. DOGGETT. You don’t envision any problem, for example, 

with Texas complying with the Fair Labor Standards Act? 

Mr. TEMPLE. We do now. 

Mr. DOGGETT. Right. And you don’t envision any problem complying with minimum wage law standards? 

Mr. TEMPLE. We do now. 

Mr. DOGGETT. Right. So a number of the things that have been 

mentioned here this morning as being burdensome in the guidance 

are simply a restatement of existing Federal law, aren’t they? 

Mr. TEMPLE. Well, not the one that I talked about. 

Mr. DOGGETT. Not the one you talked about. That is the one 

I want to identify, because there has been a lot of discussion here 

this morning about burdensome and delaying, and actually it is 

pretty unusual that you get a guidance out in less than 2 months, 

but to identify what the specifics are. And many of the specifics 

that have been mentioned are things that you are already doing 

and you have no problem complying with, like paying the minimum 

wage and like complying with the Fair Labor Standards Act. 

Mr. TEMPLE. I never cited those as being a hindrance for us. 

Mr. DOGGETT. Actually it was difficult to tell in some of the 

written testimony what was being cited so those were so global. I 


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am pleased to hear that that it is not a problem in Texas, and I 

doubt it is a problem anywhere to comply with those. 

So it is this matter of how one calculates the amount of subsidy 

that is an issue for you? 

Mr. TEMPLE. That will be an issue for us. 

Mr. DOGGETT. Are there any others? 

Mr. TEMPLE. Well, it doesn’t say that you have to do this random assignment evaluation, but that preference will be given or 

something to that nature. And, you know, we have been running 

this program for almost 2 years, and we know—we know it works. 

And it is almost as DOL is saying, okay, we know yours works in 

practice; we want you to do a study to see if it works in theory. 

I mean, we are there. 

Mr. DOGGETT. Well, it is the first time that trust funds have 

been used for a purpose other than paying benefits, and you would 

expect that in terms of fulfilling its responsibilities as a steward for 

those trust funds that there would be some examination of your 

program even if it is an award-winning program. 

Mr. TEMPLE. Certainly, understandable. 

Mr. DOGGETT. And you didn’t expect that by applying on day 

1, or almost day 1, that you necessarily should be accorded an advantage, even though I would like Texas to have an advantage, 

over the other 49 States that might choose to apply for only 10 

demonstration projects. 

Mr. TEMPLE. We absolutely thought we should have an advantage because we were the first in. Absolutely we thought we would 

be. 

And then I would mention that those trust fund dollars are dollars paid by our employers. They are not Federal dollars, they are 

State dollars. And every dollar we have ever borrowed we have 

paid back. We have never missed a benefit, we have never missed 

a loan, we paid all of our bonds early. We are retiring the one we 

currently have early. 

Mr. DOGGETT. I applaud you for your efforts on that. I hope 

that you will be able to apply and that Texas will get 1 of those 

10 demonstration projects. And as much as I would like Texas to 

always have the advantage, I think clearly the Department of 

Labor had a basis for putting out a clear guidance. There may be 

problems with some aspects of it. I am glad to get a specific rather 

than just the rhetoric we have heard so far. Thank you for your 

service. 

Mr. TEMPLE. Thank you. 

Chairman DAVIS. Thank you very much. 

The chair now recognizes Mr. Paulsen from Minnesota for 5 minutes. 

Mr. PAULSEN. Thank you, Mr. Chairman. 

And we will just follow up with Texas a little bit. I guess your 

organization won an award in 2011 from the Department of Labor 

for innovation, right? 

Mr. TEMPLE. Yes, sir, we did. 

Mr. PAULSEN. That is great. And was that based on your Texas 

Back to Work program? 

Mr. TEMPLE. Yes, sir, it was for that program. 


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Mr. PAULSEN. All right. And that program did not involve unemployment funds, but it still served unemployment recipients; is 

that correct? 

Mr. TEMPLE. Correct. It was general revenue. 

Mr. PAULSEN. Okay. And in concept the idea behind this new 

waiver authority was that programs like Texas Back to Work 

would essentially be fully integrated into the unemployment insurance program. Does this guidance allow for that? 

Mr. TEMPLE. It eventually would allow if you met those other 

criteria. That would be the funding source. 

Mr. PAULSEN. And how would you need to modify Texas Back 

to Work in order to meet the DOL requirement? What modifications might have to be met as you look forward? 

Mr. TEMPLE. There is a possibility we could need a different 

work agreement with each employer representing each individual 

we placed, rather than we just have one agreement that covers everyone, much easier to sell and much easier to explain. And our UI 

claimants actually go out and sell themselves, that we offer a 

$2,000 incentive if you hire me. And now we may, as we understand it, I may only offer, you know, $100 to $150 a month; someone else may offer $500. So we don’t have the parity in all things. 

And we ultimately want the employers to pick, obviously, the best 

candidate that we send them, and there is an incentive here to hire 

someone on UI. And we thought it was fair when everyone represented the same. And that is the concern we have, one from the 

parity and one just operationalizing it. 

Mr. PAULSEN. Mr. Gates, maybe can you add a little bit to that 

discussion? 

Mr. GATES. Well, to be honest with you, as I indicated in my 

testimony, I am not sure that New Hampshire is going to apply for 

one of the demonstration grants only because we are a very small 

State, and when we applied for the reemployment and eligibility 

assessment programs back in 2010, that grant was written by me. 

I don’t have a grant writer. You know, we believe in having more 

staff on the front line helping the public, so we are not very topheavy. The second year it was written by my director. 

The way we read this is that it appeared as if we were going to 

have to prove our concept would be successful before we could even 

try it, and that was just going to be very difficult for us and very 

time-intensive. Currently right now we are over capacity. We are 

trying to implement SIDES, TALK, Barts. You know, we are just 

trying to really do a lot of things that are moving us ahead, and 

we just saw this as just a Herculean challenge that we just couldn’t 

take on at this time. 

Mr. PAULSEN. Thank you, Mr. Chairman. I yield back. 

Chairman DAVIS. I thank the gentleman. 

The gentleman from North Dakota Mr. Berg is recognized for 5 

minutes. 

Mr. BERG. Thank you, Mr. Chairman. 

I appreciate the panel being here. And obviously we are trying 

to look for innovation and how we can do things better out here. 

I was a little bit frustrated going into the first panel. To me, it 

seems like this guidance is stifling the very innovation that we had 

hoped to get out of this effort. 


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Mr. Gates, I come from the very large State of North Dakota, so 

I have no idea what you are talking about, New Hampshire, but 

I know in your comments you didn’t apply for the waiver, and 

maybe you could expand on that a little bit more. 

Mr. GATES. Well, it is mainly, as I said before, one of capacity. 

And when we read the guidance, we thought the guidance was very 

well done, don’t get me wrong, and we think that there wasn’t anything in the guidance we took exception with. We just don’t have 

the ability to write an application that is going to meet the standards. It requires a lot of research before, during and after, and to 

be honest with you, we have so much going on now. 

We have a very effective return to work program that we initiated back in 2010, and through that—which was modeled on the 

Georgia Works, but took into great length the requirements to 

make sure that we met the Fair Labor Standards Act. We basically 

called it an extended interview, because what New Hampshire employers were telling us was that their problem was finding individuals who are going to fit in with their culture and their team. 

And so what we did was to make sure that individuals on a voluntary basis would be able to, while they were receiving unemployment, to go in and show what they could not do, because that is 

forbidden, but to show whether or not they were going to be able 

to, through observation, pick it up, and through questioning and 

through interaction with the others to see whether or not they 

would fit. We applaud the other—you know, any other State that 

does it. 

Mr. BERG. I guess what I hear you saying is it is one thing if 

we are going to appropriate money for a program or a new program. That is where you tested it, and you pulled all the research 

together, and you say, okay, we are going to go down this road. 

What we are talking about here is innovation. We are talking 

about something that is going to be risky, something that maybe 

only 20 percent of these ideas are ever going to work or really get 

people back to work. And so kind of what I hear you saying is it 

is a different mind-set in terms of, A, we are not funding a specific 

program; what we are doing is we are asking the States to take a 

little risk, try something, and we are not going to chop your head 

off if there is a mistake. 

We had the Secretary here earlier in the first panel, and, you 

know, her response was—you know, and I asked her what are the 

barriers that are happening, and she couldn’t respond to that. And 

what I would like to know is if you could be very specific on both 

New Hampshire and probably Texas, from a State’s perspective, in 

saying here are some things that are specific that we ought to 

change that will encourage States to step in, complete an application, and encourage States to bring their innovation forward so we 

can look at it. So can you just respond to that? 

Mr. GATES. Well, I guess what would help us to make our return to work program more effective is that we have been very 

mindful onto the guidance that the individuals can’t do anything. 

They can’t produce a product, they can’t do a service. And that is 

very difficult for an employer to determine whether or not—you 

know, this individual fits in, they report to work, they have a good 


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attitude, they seem to be catching on, but they haven’t done anything yet. 

And so what we have done is to try and parlay that into an onthe-job training. So we have been one of the States that has been 

very effective in maximizing on-the-job training, because that was 

the missing ingredient in our return to work program. So we actually were a State that actually went back and actually collected 

some money from other States that were not using their OJT 

money, because we burned through our money fairly quickly. OJT, 

as far as I am concerned, is the best tool that the system has to 

use in order to get individuals back to work and to show employers. 

The other thing that we are doing is Work Ready, which is to 

take individuals on a voluntary basis and to find out what their 

skills are on day 1, on their first day of unemployment, so we know 

early on what we need to do to help them to have the skills and 

abilities to be matched with an employer. 

Mr. BERG. And then just briefly, these are things that would not 

qualify under this waiver. 

Mr. GATES. These are things that we are doing now without the 

waiver. 

Mr. BERG. But if you were going to expand those with the waiver flexibility or something, is that a barrier? 

Mr. GATES. I honestly don’t know. 

Mr. BERG. Okay. Thank you. 

Mr. Temple, I know we are short on time. 

Mr. TEMPLE. Well, and again, as we had talked earlier, we were 

looking at an extension and expansion of our existing program as 

we operate it now, and understand there could have been some 

changes. But we tried to do something that was streamlined. The 

OJT program, under the Workforce Investment Act On-the-Job 

Training, still has a lot of paperwork and red tape that is required 

of employers, and they shy away from it. I know that we have had 

problems selling the OJT in times, and when we were able to put 

our general fund dollars and take away those hurdles, it was accepted much greater than our on-the-job training federally funded 

programs were. And so we were looking at trying to craft it more 

in that direction. 

But as was stated earlier, our big concern is just operational out 

of this, making it easy to understand both for the employers and 

for the job seekers. And the one that—and it is supposed to be cost 

neutral, we understand that, and we demonstrated that we have 

been cost neutral. And I don’t believe that restrictions and requirements they have in place States could monitor how they outreach. 

The one thing I would mention, though, we are serving in our 

program with general revenue State dollars not only people that we 

fund our trust fund, but also people who are being funded federally. And so savings are enuring to the benefit of Federal dollars. 

They are all tax dollars, but those are Federal dollars. Under the 

existing waiver, and under actually the way the legislation was 

written, it doesn’t allow us to serve people who are receiving Federal unemployment—extended unemployment benefits. And that 

may be something you want to consider, because right now we are 

serving both populations, and our trust fund is saving money, and 

we are saving the Federal Government money. And the expansion 


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of it to include that, I think, would reap a good return on investment. 

Mr. BERG. All right. Thank you. 

I yield back. 

Chairman DAVIS. The gentleman’s time is expired. 

The chair now recognizes Mr. McDermott from Washington for 5 

minutes. 

Mr. MCDERMOTT. Thank you, Mr. Chairman. 

Dr. Vroman, the problems that States have had has not been because they increased benefits, but because they reduced the rate 

that they were charging employers, an hourly rate that they were 

charging employers. Is that a fair statement of the problem that we 

have to date? 

Mr. VROMAN. Yes. Going back for the last 60 years, if you then 

look at the trust fund situation following the two previous recessions, taxes never came back up to where they had been in the previous recoveries, and as a consequence there was no major rebuilding of the trust funds in the mid-1990s or between 2004 and 2007. 

So when we went into the recession in 2007, the net reserves of the 

system were at their lowest position of any recession post-World 

War II. And the benefit side was actually lower in the decades of 

the 1990s and prior to 2007 than it had been in the 1970s, than 

it had been in the 1950s, than it had been in any of the previous 

periods. So the funding problem was not excessive benefit outlays 

that the States were responsible for, but the failure of taxes to 

bring the trust funds back to previous balances. 

Mr. MCDERMOTT. Can you compare the benefit, the average 

benefit, of the State of Washington and the benefit of Texas or 

Kansas? 

Mr. VROMAN. Certainly, yes. In terms of benefit levels, Washington is a little bit more generous. The maximum as a ratio to the 

statewide wage is a little bit higher in Washington. But the contrast, the big contrast, between Washington and Texas is the share 

of the unemployed who collect benefits. In Washington State it 

averages 40 to 45 percent in most years, most nonrecession years, 

whereas in Texas it is closer to 20 to 25 percent. 

There is a big range of recipiency rates across the system, and 

the variance from one State to the next is much larger in terms of 

what share the unemployed collect compared to what the payment 

levels are relative to past wages. 

Mr. MCDERMOTT. How does that work? I mean, how does 

Texas exclude three-quarters of the people? 

Mr. VROMAN. They have harder eligibility requirements, for example, misconduct determinations by the State affect more than 30 

percent of applicants in Texas, whereas in Washington State they 

affect fewer than 15 percent. That is a major factor. It is sort of 

like a race of hurdles where if you are a claimant trying to go down 

the track, it is a lot easier if the hurdles are lower. And Texas has 

higher hurdles than Washington State. 

Mr. MCDERMOTT. How about the indexing of the average wage 

in the State? 

Mr. VROMAN. To the tax base? 

Mr. MCDERMOTT. I mean, the tax base in Washington State— 

or the Federal one has not been changed, I think, since 1983. 


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Mr. VROMAN. 1983, correct, yes. 

Mr. MCDERMOTT. Which is $8,000. 

Mr. VROMAN. $7,000. 

Mr. MCDERMOTT. Seven thousand dollars. It is practically 

nothing. 

Mr. VROMAN. Yes, very low. 

Mr. MCDERMOTT. What would it be if it had been indexed since 

1983? 

Mr. VROMAN. Average wages in the country since 1983 have roughly tripled, so the 7- would be $21,000 had the Federal tax 

base maintained its position to the average wage. And Washington 

State, which indexes at 80 percent of the statewide wage, now has 

a number like, I think, $38,000, something like that. 

There is a graphic in my written testimony that compares the average tax base in the 16 indexed States against the 35 nonindexed. 

The 35 nonindexed in 2012 have an average tax base that is below 

$11,000 and is less than $4,000 above the Federal tax base. States 

without indexation could raise it by State legislation, but there is 

extreme reluctance, and that reluctance has been present for a very 

long time. 

Mr. MCDERMOTT. Let me just switch here to this issue of the 

guidance that was issued by the Department with respect to this 

waiver. My understanding is that it requires that—what we put 

out requires neutrality in the trust funds, that they not cost more 

to do these. 

Now, is there—we have heard complaints about it. They have 

said, oh, it is too cumbersome, and we are going to have to individually look at everybody, and we have got all kinds of reasons. Is 

there a way to guarantee that neutrality, or should we just throw 

the money to Texas and say, go and do whatever you want with 

it, we don’t care what it does to your trust funds? 

Mr. VROMAN. I do not have enough expertise in the evaluation 

that will accompany these waivers to have a judgment about what 

the net effect on the trust fund is likely to be. I am sorry to pass 

on your question, but I don’t think I am the right person to answer 

it. 

Mr. MCDERMOTT. We are trying to figure out how to make it 

work. I think that is probably the most important thing. 

I yield back the balance of my time. 

Chairman DAVIS. I thank the gentleman. 

And Mr. Reed from New York will have the last word. 

Mr. REED. Thank you, Mr. Chairman. 

Following up on this conversation of my colleague Mr. 

McDermott, Mr. Holmes, do you have anything you would like to 

offer on the differing tax rates being discussed here? 

Mr. HOLMES. Yes. I think that, at least from an employer’s perspective, each State is different. You know, each State has a different industrial make-up. Each State has negotiated and has a 

mature sense about what the tax rate should be with respect to 

funding unemployment insurance. In some States it is a lower tax 

base and a higher contribution rate schedule. 

I think that it is difficult to draw the conclusion that all States 

should have an indexed wage base unless you also evaluate benefit 

payout and also the make-up of the State. I know a number of 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
132 

States in which there have been significant increases in benefits. 

And, in fact, the trendline with respect to the replacement rate 

across the country, replacement of wage rate, has been up at least 

since 1988, according to the Department of Labor. 

So I think that we have to look at all the different pieces of the 

puzzle before making a conclusion about what should be done at 

the national level. 

The other thing I would say is that I think you should pay attention to the FUTA tax revenue for the purposes that it is dedicated 

for, which primarily should be administration of the programs, 

State and Federal, with some money for extended benefits if we 

trigger on. 

But as far as the State goes, that is a much different conversation, and we can’t really link the two and say one needs to be increased because the other one hasn’t been raised for a while. 

So those would be my thoughts about it. 

Mr. REED. Well, I appreciate that comment. 

Dr. Vroman, I can’t miss this opportunity. I was reading your 

testimony, and on page 10 you indicate a conclusion, ‘‘There is likely to be another recession later in the present decade.’’ What is 

your source? It is not footnoted. What is your source for that conclusion? 

Mr. VROMAN. Since World War II, we have had 11. World War 

II has 60 years roughly to the present. Our economy tends to have 

a cyclical nature to it, and that is the basis for my comments. 

Mr. REED. So just based on patterns of history, you are projecting. 

Mr. VROMAN. Yes. And we have been fortunate in the last three 

decades. 1982, 1991, 2001, and the great recession. That is only 

four over about a 30-year period, so, in fact, the length between recessions has tended to grow, but there is going to be another one, 

and it is most likely—— 

Mr. REED. I am very interested. You put a timeline on it of the 

end of the decade, so I am interested in what your thoughts would 

be to the White House as to what we could do to avoid this recession that is coming down the pipeline according to you. What 

should the White House be doing right now? 

Mr. VROMAN. Pray? No one has that good a crystal ball, and 

I am trained as an economist. The surprise that the economics profession received at the depth and duration of the current recession 

should be a sobering reminder to all economists that our ability to 

forecast is extremely limited. And so—— 

Mr. REED. So your own conclusion is probably just a guess, just 

a shot in the dark? 

Mr. VROMAN. Yes. 

Mr. REED. Okay. I appreciate that then. 

Mr. Holmes, what I would be interested in is following up a little 

bit on the drug-testing issue that we talked about previously with 

the prior witness. From your perspective in the private sector, how 

big of an issue is reemployment and folks potentially that have a 

drug issue? Could you comment on that? 

Mr. HOLMES. Certainly it is a significant issue with respect to 

not just the controlled substances which are addressed in the bill, 

but also abuse of prescription drugs. It is a significant cost for emVerDate Mar 15 2010 08:09 Oct 28, 2013 Jkt 078665 PO 00000 Frm 00136 Fmt 6633 Sfmt 6602 I:\WAYS\OUT\78665.XXX 78665

wwoods2 on DSK499XVN1PROD with WAYS & MEANS
133 

ployers with respect to their employees, their performance on the 

job, and also making decisions about firing people or hiring people. 

Obviously their background with respect to drugs and whether they 

are testing positive or not, that becomes a significant part of the 

hiring decision process, and it hits the bottom line for employers. 

So I think we recognize that it is a big problem, and as I think 

I said in my testimony, it is something that we would like to have 

the business community, if a State chooses to go in that direction, 

be part of the evaluation of what really works, since we do have 

significant experience in how to address these issues. 

Mr. REED. Well, I appreciate that. When you say a big problem, 

is there any way to quantify it when you reference ‘‘big problem’’ 

in your testimony? 

Mr. HOLMES. I would have to go back and pull some data. I 

don’t have it with me today. 

One of the difficulties about UI as compared to public assistance 

programs is there is a fair amount of data that addresses this with 

respect to public assistance programs; less data that addresses it 

with respect specifically to UI, because it just hasn’t been done as 

much. 

Mr. REED. Appreciate that information. Thank you very much. 

With that, Mr. Chairman, I yield back. 

Chairman DAVIS. I thank the gentleman. 

I would also like to thank all of our witnesses and the staff for 

coming and joining us today. I appreciate your help in understanding this issue further. We look forward to working with you 

in the time ahead. 

Members may have additional questions. If they do, they will 

submit them directly to you in writing, and we would appreciate 

your responses back to the subcommittee for the record that it 

could be shared with all concerned. 

Chairman DAVIS. Thank you again, and with that the committee stands adjourned. 

[Whereupon, at 12:10 p.m., the subcommittee was adjourned.] 

[Member Submissions for the Record follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANS
134 

Statement of The Honorable Tom Reed 


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Key Findings 

What percentage of organizations conducted pre-employment drug testing in 2011 ? More than 

one-oalf of organizations (57%) indicated that they conduct drug testing on all rob candidates, More 

than one-Quar1er (29%) of the organizations do not have a pre-employment drug testing program, 

Is there a tie between drug testing programs and absenteeism? Yes. In organizations with high 

employee absenteeism rates (more than 15%), the implementation of a drug testing program appears 

to have an impact. Nine percent of organizations reported high absenteeism rates (>15%) prior to a 

drug testing program, whereas only 4% of organizations reported high absenteeism rates after the 

implementation of a drug testing program, a decrease of approximately 50%. 

Are workers' compensation rates affected by drug testing programs? Yes. In organizations with 

high workers' compensation incidence rates (>6%), the implementation of a drug testing program 

appears to have an impact Fourteen percent of organizations reported high workers' compensation 

incidence rates prior to a drug testing program. whereas only 6% of organizations reported similar rat

of workers' comp after the implementation of a drug testing program, a decrease of approximately 50

Do drug testing programs improve employee productivity rates? Nearly one-fifth (1 g%) of 

organizations experienced an increase in productivity after the implementation of a drug testing 

program. 

How much of an impact do drug testing programs have on employee turnover rates? Sixteen 

percent of organizations saw a decrease 'in employee turnover rates after the implementation of drug 

testing programs, 

Do multinational organizations apply similar drug testing protocols/policies in the United State

and globally? Nearly three-Quarters (72%) of organizations that have multinational operations 

indicated that ali, almost all or some of the same protocols/policies are applied While conducting drug 

tests outside the United States_ 

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Insert 78665A.112wwoods2 on DSK499XVN1PROD with WAYS & MEANS

For approximately how many years has your organization been 

conducting pre· and/or post·employment drug testing? 

7 years or more 

5 to 6 years 12% 

3 to 4 years 12% 

1 to 2 years 

Less than 12 months 

69% 

N(,Ie. n s 626. P",,,,,nt .. <1<1Il0l total tOO% doo !o roulldin!l. liR _,., 851<"" to _ fQ the hlglHMl yea," 

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Insert 78665A.113wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Does your organization conduct pre-employment drug testing 

with job candidates? 

57% 

All job candidates i 55% 

Selected job candidates (e.g., for safety-sensitive I--UiI 

positions) [ I • 17% 

When required by state law (e.g., DOT) 

l4% 

7% 

----------

--

,.,..-Mom than onG-haN of organizahons 

• (57%) [I>dicaled that tl\ey c:ooduct drug 

t testing on aU ioP (CIl/!did81e:j. M<lI1! \!'Ian 

• one-qllBrter (29%) of the organfzations 

" not 1\31/8 a druc;J tastIng 

' -.jlfogrnm. 

-, 

---- ------------_ 

29% 

No. my organization does nol conduct drug testing . _ J1 

0 2011 0 2010 

n "' 320' 

for any of its job candidates 

Mlle' I-IR .."" __ rtI<1 -""" &Jr.-__ .11<:1_ from 1M NJ/OI)'$i$_ 

nr..o-_",," __ 
141 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.114

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Insert 78665A.117wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Does your organization conduct and/or post-employment 

drug testing with its contract employees? 

Comparison by Organization Staff Size 

Larger organizations (500 or more employees) are more likely to conduct pre-employment drug testin8 for 

contract employees compared with smaller organizations (fewer 500 employees). 

Smaller Organi.atlon. l.orge r Difference. Based on Staff Si.e 

.500 to 2,499 (30%) 

.1 to 99 emplovee, (17") .2.,WO to 14,999 emplovees (36%) · 100 10 499 employees (19%) larKe. orKilnilation. ,. ,mallei organilitioM 

' 25.000+ employees (44'110) 

," .. nr. .. r"'''·y ''_e81I<M' .. " 
145 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.118

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Insert 78665A.119wwoods2 on DSK499XVN1PROD with WAYS & MEANS

To what degree are the U.S. and/or 

protocols/polices also applied at locations outside the United 

States? 

To a large degree-all or almost all of Ihe 

same prOlocols/policies are applle<! al 

locations outside the U.S. 

U\ree-quao1e<s (72%) 0

OIgan,zabons thai have 

3301 ' multinalKlMI ope!aboos Iodic

/0: thai an. almosl all 01 some of 

, same prolOCOlsJjJOiicies are 

\ applied while oondUding drug 

the Uniled Slates. 

To some degree-some of the same Id • 390,{ protocols/polices are appUed at locations II,-. _________ J 0 

outside Ihe u.s. '. 

To no few or none of the 

same protocols/policies afe applied at IJ.. ' 

locallons outside the U.S. • 

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r 

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Absenteeism rates at organizations before and after drug testing 

program implementation 

Before implementation of a drug After implementation of a drug 

testing program testing program 

("a 182) (" a 111) 

0-15% 91 % 96% 

More than 15% 9% 4% 

.. 

--

-, 

.--- ----------------------------------

9% of O1'ganizallons reported rngh absentHism rales. (more lhan 15%) 

AMer implementation of e drug testing program 4'11. 01 organ1lations 

reported high absllnleeism rallls. a of approiUmately 50'11.. 

-- -

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Insert 78665A.122wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Workers' compensation incidence rates at organizations before 

and after drug testing program implementation 

Beta,.. implementation of a drug After implementation of a drug 

testing program testing program 

1" ..... 1551 I" " lUI 

04 6% 86% 94% 

More than 6% 14% 6% 

----

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1."" Df Ofgan1zations repo.1et1 high worte<s' cOr{lll<lnsalion "JCideoce rS11tS p"';" - - - - _ 

to a drug testing program, whereas only 6% Df OrQ<l"lZ8ilons rePOrted similar mtes "-

01 workel'll' comp after the implementBtion of 8 drug testing program, a dSCl'ease ' of apllrOl(lmalaly-50%.. ", 

---. 

No/Jo: HR .. oo an_Old ."".. wre-..... e 81:_ r""" rhl .. 

Insert 78665A.123wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Change in employee productivity in organizations after drug 

testing program implementation 

1% 

Decreased 

/ 

81% 

, 

, 

, 

, 

-

Remained the same 

--

.. 

NMfly one·frfln (19%) 01 

OfganlzallOfls experienced an 

increase in ptOduClMly after 

the lmp!em&!1tatlon 01 OJ drug 

. teslif19 program. 

------ -.-

19% 

Increased 

Nore.. n • !i13. HR p«>feSfliotllJ/8 who an_ -no! .. "",. _'" tu.cluded /rom 1/110 ooaIysls_ Pett:6nlago>s do ,... /Oi/}j 100,.; d .... 10 

--

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Insert 78665A.124wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Change in employee turnover rates in organizations after drug 

testing program implementation 

16% 

Decreased 

76% 

---- -------. 

,,-

-"" 6% of organizatIOns saw a o;IocreaSl.! (n t employee turnover ",lies aft .. r tile 

of drug 1"'1In;g p<ograms. 

-- ------_.-

8% 

Remained the same Increased 

NOM. n • 520. HR {JIOle&!iJonalt; who 8n_&<1 -no! _rG ""c/ixJed from 

DIl"l1 .... .. 
152 


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Does your organization conduct drug testing in-house or at an 

off-site testing facility run by another entity? 

orr-site drug testing facility only 

Both in-house and off·site testing 

In-nouse mug testing (either urine, oral flUid or both, 

using instant testing products) 

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16% 

7% 

77% 
154 


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Insert 78665A.128wwoods2 on DSK499XVN1PROD with WAYS & MEANS

How much does it cost your organization each time a drug test 

in conducted (per employee or job candidate)? 

12% 

Less than $10 $11 • $20 

""'" 

24% 

... 

$21 • $30 

24% 

• 

18% 

$31 • $40 $41 ·$50 $51 or more 

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What are the primary reasons your organization does not 

conduct pre-and/or post-employment drug testing? 

My organization does not believe in drug testing I 

Not required to do drug testing by the state j/18% 

No return on investment 111 6% 

Too costly 1116% 

11 % 

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Insert 78665A.134wwoods2 on DSK499XVN1PROD with WAYS & MEANS

What is the primary reason your organization does not conduct 

pre- and/or post-employment drug testing? 

Comparison by Organization Staff Size 

1-10 ,''- 500-2,499 2,5(1).24,899 

......,... employees emplOyees 

In--1011) In'. 95) (n-H) In .21) 

Myorganaation does not believe in 

drUg tesUng 23% 22% 28% 19% 

Not required to do drug lesting by 21% 6% 25% 24% state 

No return on investment 11% 19% 25% 5% 

Too cosily '4% '9% 11% ' 9% 

Nol applicablefnot oecessary 15% 10% 0% 0% 

Administratively difficult 4% 9% 3% 19% 

Plan to conduct dM testing 10 the 4% 3% 0% 0% fUture 

Other 7% 11% 8% 14% 

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Insert 78665A.137wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Demographics: Industry (Continued) 

Industry 

Real estate and rental and leasing 2% Religious I grant-making, civic, professional and similar organizations 2% 

Transportation and warehousing 2% 

Wholesa)e trade 2% 

Administrative and support and waste management and remediation services 1% Agriculture, forestry, fishIng and hUl'ltlng 1% 

Management of companIes and enterprises 1% Mininll '" 

Repair and maintenance 1% 

Personal and laufldry $l!rvic.es -Private households -

Other servIces except public admlnlstratfon 8% 

n 1.024 .fl,.....' ... ..... 
165 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.138

------------11 !! ~ I _ ~ " o 

I 

Insert 78665A.139wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Demographics: Organization Sector 

PublICly owned for-profit organization 

Pnvately owned for-profit organization I 19% 

Nonprofit organization I 19% 

Government sector I 8% 

Other 

" - 888 

P 

4% 

Insert 78665A.140wwoods2 on DSK499XVN1PROD with WAYS & MEANS

Demographics: Other 

Does your organization have U.S.-based 

operations (business units) only or 

does It operate muillnationaily? 

U,s.-base<loperations I 78'" 

Wlinational operatIOns I 23'11 

NtJIe· fI _ "-,.,. <k> (lOI1<!l.' 100% 

diJrI to fOUfIdifIg. 

Are HR policies and practices determined by 

the mUhl-unlt corporate headqu8lters, by each 

work location Of both? 

Multi·unit headquanel'$ delermines HR 

pojlcies and practices ",. 

Each I"OfI( IocaIiofl detM!11nea HA pOildes '" and practic:e9 

A combinatKlI"I 01 both It>e work location 

and ttle mUlti-unit headquarters determine ,,% 

HR pojlcles and practices 

""".: "_519 

Is your orllanlzallon a slnllie-unit company or a 

multl-unlt company? 

Slngte·.mit company' A COIflpw1y In 

l'Alich the and Ihe ,... 

are Ihe same 

Mu/ll-unit company: A company Ihat 68% has more than one location. 

*-: n 

_

&til 

Level of HA depal1mentlfunc:tion for whlC:h 

you ,esponded th,oUllh this survey. 

Corporate (COOlPIiflY 'MOe) ,,.. 

Business unit/diviSIOn '''' Fac:.1J1yIloc:Mion 

"

,. 

Ni;f.:n- 621 
168 

f 

[Member Questions for the Record follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.141
169 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.088

Questions for the Record from Chairman DavIs to The Honorable 

Jane Oates 

Hearing on Mov ing from Unemployment Checks to 

Payc hecks:_lmplementing Recent Reforms 

April 25, 2012 

Ways and Means Subcommittee on Human Resources 
170 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.089

~ Honcnbl. 0<0"0."", """". Subco<ID:niu .. "" Hwn.., a.-

U,S. H.,..."o(Rcpt<aent&l.iv .. 

W.wnglon.D.C. 2MIS 

.- ., . ........... -.- ..... _," ..... 

tbank' YO. Nr 1M opp<II\"';ly IOlaIify IIllIo Apn12S, 2011 boIrioa. ",prIDe. implelnenwion 

crib< tIwIJtlIO _pIo)'lllOll1 ~i"" ..... in llIo Middle 0 ... ,... Relief ODd 101> 

o-imAclonOIl, 

I .. <Dcl~ lilY ogaIey'. rdpO<IK II>)WI' 'I\I .. ti ..... "",ludI", l!Io-wulurull •• cd q""""'" '" yow loner, II> ~ lho 1«'0«1 of lb. beorina, 

w. woloolue lb. opponuniIy to work w;!Il Coair< .. on 0, ... ""-'po ""~ "" ... yoikcr 

lqi.ution thai _ Ilto.- of Amorita' . ..... ploycd ..... .t .... 

If)'Ol' have addiliona! quationa.)'QO lIllY""","", Mr. Adri J.lyaratt>e. SGljor lep..lali.oOfli.,.,., 

Of!'i« of~_1 ""d Inw,ovtn\ll\en\ol Affairs, .1 (102) 6'J1-4600. 

Si:to: .. cIy, 
171 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.090

.,.... .. " _110. Drpan_., _ •• I,.,u,ifIttI .. b .. ;',pWM«f~_ P'_' ..... tH .... ,. ,. oIid .oM .. n for .... 1'016 .. " (loo ... It"", .. II . ........ P'ntoMu I ... .... l<1li l"..,. ........... o<ilk...,. '<qolrH br 00 ..... ). 

In.....,.al. , ... o.porttnOllI .. fL.obo< (~')""'~...-..y ""'C,",_ ........ 

.... L<If ofI'OO''''B lhe _Ioymmt ,.....-. (UI) pro""". "Of ""1IfII'10. """'ill IlOl rnu.IoLe<l 

hui "' trIIIUt> ~ imp_toe;"", 1I>O~' iN""" Unetnplo)'fllf'll I ........ "'" 

"""""" I.e"", No. 02-12_, ,he UI ' .... 'rhy "",viiao. it> 1IwTn60 MJIWmaL' oI....otano. 

Eli ............. 'ofUnl "-!yl ..... .,1KImmI ...... r"' .. ly ..... irod!hol "'" ~I iMut 

,,""-co Go.i .... ""'iI...-...y bcn_~poDtida~~~.w. 

~~ ..... ~_whkll __ bt_"'d....u. ....... ' .... ~ot 

.~".,..n;c.'.~Ik .. _dIoIOIaI .. _ ...... hiclI .... _;. ...... 

lnobor1.pod.oroe< .. -,.IeI __ rcn., 'PI ' .... of.' ........ I01I11_. '/lie 

Iooutd ~ ... Rttioo< ~11;Il .. f"" M~lea- T .. RdidoMl Job c-;. M ofNl2 '" 

.....,Ihao 1I.&IcII--..d O" ... ""Y""I'"1tmOIIb 1Or'~~~'" 

... """" ..... ond Ibc c.ri<eria III", .... 11 ... .....,iIkraI wboo <bar oprI~ on: bo::il\4 n:.;e ... ..t. Th\I<. III " .... will 100 ••• fw O!'!"'fI ...... y III b<com< .... of U>o. , (1 ........... s..:,...,. may """,,,,",, 10 openLO • .s. mo<IOtnotlon~ ..... 

S-d.lHlw"- III. Dc-ponm .. " btlln·.'k.' .... ..r'~' .... dldo ... 1 ,"".1, ....... I",S .. ,. 

dtlOof."n' .... p«r,,,'opp lln'I<L&,I._ 1o ,) ... rotro",I.U., lbo' ron .... '· ... 4 IIoc 

_ of '" ... "',..,. ' .... "._ ... , . J.1IIIIotd. 

no Settetory .. r.....,. (Scoaoryjlla'" ioapoood .... v--. ....... «at ............ '. 

,-= 

~ 

...... T1Io._ Ii_ "" Sea...,. widr dtoDuiooo .. ....w..",.... '" __ ..... projca • ..,... ....... ,III __ pro:wi4i., ",..!y ",.. ......... ". ....... inIo"'llp '" 

ltr"u:h~ ...... Tho ~'. ",,<!ltIDo. UlICI"IIpioyroon' I-.....o""'..-lctt<f 

(Ull'1.) ~ 15-11 • .,..,video''''''''- il'lfomlotioo III Ibe __ I Iht pnoriti .. \hat .... in 

I"ido 11>0 Sc<:MOf)''' silo .. ..,,; ... !hi. dl~1t"- Acron!lndY. Iht U1l'L. in on _!f0ll1a ""''''''''< tran&pIInm<y ...... _ ,hal J(atC$ 0II0II1d intJude i,.fom..na., In lII';r ~ IhoL 

_~ 

",<I< ... ~ '" ~ __ ,....."... WW .. ........... """"""'.><I ...... , -U--.... u ""'_. it .... "'" ,""1utkI1bc .. _,,,,<If_ .......... , irt~ Gi ..... 1he 

1~ ~mi,""", nih< _cd II"fPOIO' of"'" ~ pnojocc~ i.e .. leO""" ... .....-.; ... __ """ ........... lor QpooIi.,.. r.-.plo)'IIICIII ""'" iottpooI,.1hc .rr..:_ 

of_' '''''~ .1Iom. 11M Sraaaty'l ~ lei ...... tile io!.,."...;,. ......... lei 

odctIlhc _ -"""* 1IJI!Il1aI_ .. _""""""'"" -u.. ofhef .-y........,.. W • .-ilia! m ......... Mille II"~ ....,.ideo Won".'"", """'" ",1\01 _ "''''' -.tL io 1loruapp!,.o-._ "' ..... u.. ""'" _ 11>0 ..... """)' """" .......... lOr OWnl"" 0lId """,!>ib ob<rn <If .... qplkobl< F .. ,.,..., Of ..... IIW1 ''''I rorlllOl bo .... ;.011 ood mIlS! be «ontI~ "hal 

dovtlopl",. Plopooed dem ..... lnlkPn I'I'Ije.:l. Fu""",, tb< Soc,......,.·. pri".nico .. n.;, tl\o 

in .............. or ..,.;" ..... "',""~caI _k ... pr<'\< .. "n',,"''''' ....... 1\1 U," .L.t!a _~ployn:o"", 
172 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.091

fundf...., "'" .... 1 '" WId., ';.0: .. bile nwillli.<in, IheQ P"""Wlil~ 10 I...., obouIlho \>00, 

approao:b<o '" "'Ipi", ... <IIlf'iO)'Cd work.,. f!lld pod jobs, 

I. r.,<4 ol l'0or .. rlm. t .. t!"", .~ dl ....... ~o .. ~ . .. I .. "lib •• tJqulfd ID.I ...... '" 

I«b.ol"l)' ""'U 1< .. lib" Impl<me.do. P"'C'"'" <~aol'" liII. I ••• b ...... I. Ibe .. .tItr 

01 .. «"" of .. I .. dtd bnellIJ 'h' . ........ p"yablt. W .... I. I~ . DtpOrt-'1 . f La .... r 

d.lo ~ .~dd .... Ihlo b ... ? Wh .. ra",do.. Provo" _ro!uollo ••• d tb.ImjmI.· ...... 1 

or IT p"~ .. he. Ih . Emplo)' .... ' ... d Troillo, dml. i>t '"~"" d ... lb ..... 1<1:1< pl~ .. I'IT 

W_JlI> Ib.I .... 1 of prl<>rl", It ,_1 ... 1 

Mmy ilaIeI' Ul P"'j!taII'I • .,¢ OII ...... cd "';Ih lsi", infonQorian lodnJlol!)' ~l"\a!I" ....... d&ti:ng 

bK~ 10 tho 19100, S ...... ""Ih th<K .. tiqllOlCd J)'IIaIU h ... Md difficutly wnpl.oS up 10 

pror_ ~·~I worklood, .-wi modifyinS Ihoir oystemS 10 1Ia'.<Xnmadar. III. I!o:>er""",y 

U ...... plo)1ll<Oll c..m.,.,....;"", F.,Jenl Mdj,looal Contpensotloo • ....t 6.told«l » .. crt! 

PfOIIVlU. Tha. diffi •• lti .. h.o ... rnllte.l i~ dooLoJ"'d poymetlb 10 clijiblc _Ioyeo! wm.,., 

clIlllcl1p i" implon>omi"l "'". IOI>b ID qui,_ly_ one! =0 .... i"""opof Ill"" ...... onc\ 

lItpIi"" medi. Illen,...,. II> oddot,on. Ihc older ')'SICIN """" "'" <leaisned '" Ibe<! 6. pIOblic', (<l>InwU:and cmplo)'Crl) I:lCpoc:tIlioIII flit .1""",,01. one! online .. _ ~_ Tho I .. k 

0 

of 

.... 

"""1\1 tbo P"1 •• 1( 

cloc:ad. 

In .....o:mi.ing 

ha. I.n tI)I>$I: 

"'" 'nformotioo. 

' rotan> .. riok 

,,,,hnoloiYltI& 01 (1Ii1 ... 1D .. 

", 

'nlQ\Jte 

.. I Iholr of ... 

_e 

""~ 

UI 

...;..;"." 

~ 

_ Oft tlK>c:<p<ri ..... of" ,." . ut<t IhOi ...... 111 ......, Ikvclopod _ ben.r. .. or 'ax 'l"1 .... 

one!lllooo "!Tenny In "" ... lc>pnenl, iIIo;o;' for ....... cu,toml .. /11aX 0' ...... fil ~t .... """'P _ $4() 10 $$0 rnilGcm: "",Il.1aIc> "'" ill no«! ufl now _rotor to> .r>I .... '" b<>1II, The 

ooa offl.,wh"1 'od;';dual'l<Sll><ni~ Ma", ')'II1CnIS, ....., if""". '"""'" """"" 0...,. "",llipl< 

)nIO, .. ..... rn.rd>ble in .... <un .... i>oJdea ",,\'Irt>cunaII; !bcn:fln, 0l"a.1DII>I , O<!< 

mll.b",u " ·e",lulio>no 10 ool<Ir= .... clLollonp.. 

In rileal Y .... (FY).2Q09. Ibe 0<"""",,"', Etllplo)m':lll and T",,,,,", Adm,"i"r.Won (ETA) 

b'lI'" testing. <_ ..... unIIetY M '«"'ce ...... ODd -..,.,.1 ...... tbo Kpl"""""", of 0l1IIL0!«I UI 

""""fit and Ia. ')'IIlem<, ..... r" .. 'Wp • ..., ><e<pIeJ pltlJ'OS>lo f,,,,,,.we ..,r.soni.1D deUm,;"" 

~ r .... ibW'r of d"".lop~ .... ~I ""I"~"""'" ~r ....... lJl IT 1I .... r-.. ....v'" To>< 

S)"! .... tIw <'<>Ilk! ... _d by ,"ult'l>Io~. Two <OIISCfii. ,.... flUldcd lIV<logh -1Cf""1t sront< for IbM J!Il1P<I&t. 

l.'UO<Ir1Ii1", r",lIft ~tll.! l'urpo" A1)IO~' AI"'''''' 

, Ari_ Id.obo. North [leyclDpmc::nlof $18,6 mi\~"" 

o...ltOlJ ond Wyo .. iO!! furrcl;'1U! 

mquirom ..... fm VI 

inlqraltdlW~·r ,.. w~ ~ 

, Goo", .. NIlfth C ... l ..... 0<>'<lDF"""" o( $9.9 minion 

Soulh Coral ... and fwI<IiO<\lol 

, 
173 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.092

Tho 

___ 

"""""""" b I _ Ul .... b<I>diJ. """'-""~ __ ""' 

... ..... ,,-""m ..... obk: <ocld \0 be .ioiaUydrtc!op _ by IQlIIpIe Iho ~ __ wiIbouIlhe 

-.lfOl~~oflhf~"", ... "'k~fw.....ailkorionlro 

~!henecdaof;""Md~_ n..~I!/fot<V""""""'II"1O 

iIlIIIIhIdiu 

~ 

procell""", '" !he mnr",,,,,, .Ien! poosiblo .o build ......... " s~ .... h;r.h on<~ 

, .. ! , .. 1N ,,,,,Id II>m be <IIOIami.«1 11> oddRM m'quc ... 1e 1 .... 1Il(IItU.ifl!<d in!o 

Ihor.,.inIILlle IT ~L "" • .-,1, of""'lnilioJ inYc$llD<1ll"!he"""'Ol.lIC~' 

lEI ZOO9IO...,.<HII UUOpt<><al.w.........u. ... =posilionool in 201110 """'<'011'0 ......... 

....-for ilnj>Jcm..,wion. 

III I'Y 1011.1Imdiq~""";bblolD ...... tbo ...... nisbn&_-""" ~ID 

1,.....~"""impkwn' .......... "',.....~~lObosi~~ 

OII""'UO'o ~~ ..... tbo ......... u"""booil4 .... II>twM;OflKfinI """,_-.tiL CbnmIIy.1lMn __ ........ oaniaol ............. "*"-.... of 

... t\oII .... _')'RmU: 

C?o ... tt1g l9 -; l'f ~.t 5.111, h •• Ao>dU! 

• "ltd..,,' , Arim .... Calo<lllo. t<I<IIIh ~of..,m .. p_ $7lmiU~ 

Dakoto ond W)QIIi:Ia _fiu"""tax.,...... 

, GeorJia, NonII Combaa. DrvdoponaII oll ..... 1bs S501IIiIIio. 

SooIIII c-am..-I .,... T_ 

, v ....... W .. V ........ Doodop .... _- S6 .. ;u;.. ""- -ilia pn>duI:lI l'tum u.. ..... <ono.,.".ubuor ... 

"ll ,ht",,-,;. h ......... lop<d Ill. (~rI< "''''won ,bo sY"etrI """io!unnn .ITon. 

1tw;Nc!u.. ("""ill rolu >nd """",dSillihlios ro. ... h orlile pilltntf s"" .... ilhin 1lI._i>. 

_-....of~ .. ; ........ i'.k,.Iq/ ... "'u ... onII ........ """'""IUlI-. 

They.., doo ......tel> ETA 1'1-I .. _ ...... -.rd. 

~ __ ofrr·)'tI<m!;" ..... Io·IOp~11or""'~_""""'''''pc<I 

aIdiIooInIl--w. '" _1IPSd1on ill FY 101110"'" ~ or .... ~ "-""& b bolb 

Ul~ .... ~""*""" 0Il~'>yll.li112.",_UI~I_ 

Il ,o~"'I" ""'~I)''''"",lyb rv 1011 fuoodic,lliwllli.,.."..... 

Flowb'. ETA 1OO<b <loKI)' "';!b "'" NotQ.aI AouItia&n of SLll~ Wor'iJa<<< " 1_;'" 

lol1:om>obon r"d",,,loty liIIppon e.",., (ITSClIO "","port onoI """"" 'be~. \J1 IT 

!Q/>!IOnIl .. ,ooo, efl\>rts. me it. <oII,bot.tioI, OfSIJle W"rtdi>ltt' "SO"'i .. ISWN), Ill. 
174 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.093

Ilq>arunenl:and poi ... _lor pat!nU', The rrsc ;, dtdIoalo<lto _ til< lI\IIKOPTIiIIc: 

~hCOl"'" or i.ronnal"'" 1«1I<>o1Clg)'. !>k~ 010,.. ""'Y 1<1<19~ III provide """" 0WInIe, 

.fficiftll, _1.1f .. ~"". M<l1 ...... ~....w:. for Ul ..... _ . 

1. 00 AprP 3. !on • cro.p of h .. l .... 1 .. <1< .. "role .. 1<1., you 10 Ih ftCII1.lloIt. Ih' pHd. le th . . . .. I ... . d."d '" ... . ... d .0M • .. · •• 11< ..................... ~.kI ....... ~. l .. .... 

a.,. lbobl. f..- "orlIw ".d ,h •• lI/;fble fo. VI .,....11 ... A_"U. , I. tlo<!. 1<1 1 ... , ......... 1 

.... 1all ........ lndl<. p,.""Io ••• r ".1,. 112-9010, 

Do >"" b<ll .... 111.« I ........ dkllo. II<Iw ••• III. I ..... d "" ..... 1 "taIoU.oo? If .... 

"bol 10 oo r pi .. , bo".dlnE tlm.fro" ..... fOT .dd, ... l •• Ib b ..... , 

"" ".1\OI<d in....,. "'"P"""" \I> th. N&Iio<W Pedo<atio>o of Ind<poo\d"lt a .. in<S>d (NFID), II><-

o..,..,tmcnI boo Ioog illkfpfficd caul" provlli .... r Fodcnl bow to ""I'l~~ lbol ... te """ 

""lui", \hal UI "", .. fils only be ~d to iudivi<lt.lal. w!lel ..., obI< to .. "", and ........ Ioblo for 

"",I<, TlII< intapretal"'" ...... <:Odi6cd 1ft "'gulali ... ot :ro CF1t p.., 61)4 (J.muary 16.'2Il0'l). I" 

odJilioft, all <W .. """",Uy "''I"i'" individlWo 10 x~"' y ~b W. ,,'0<11 to be ell""l. WI Ul 

IrnIefolS, 

w • ..., !'eYiowin, .... """", Koid.tt ... oncl "'Jol.l.,... to dOltmti,., Ifll1~ ,rn,iollS"""", kr '" 

nllIIIob_OII 1lIt ..... F<dcnl """""""en,, Ih>o ,odividbakmwl bcabl~Itt....,,1<, .V>ibbl,kr 

""'<k, ond '''h".ly...ura wark. A,!be U1 PlOP"" to" (edenl·.w< i'"'\IImnip. b_ "" 

f<dcnllow '0\1, paid lind .. ,llIte ];no, ... 1Q't.... cmsid<,obl. n .. ibilily 10 d<tamin. how l<I 

lippi, qoo:'6< ~ Itt tho ""'quo ._ ......... oIWliri4uo1 claUnrt ... Thr DqI..". ... t 

O>tp«ilOO pmri"" r!.>_ hat Ai_ ow ... ....."w,le p.1f0tll<'lm bullb.t ~'" ...... IIote 

n"'''l'ly. r=pri", WI indil'idllOJ, do "'" b ••• In be .. oil>bl. f", w.xh. _l<inll ....... ~ 

1Ioun. day. 5OY." r!.>)'J • w""" lO be lj~bl. fOr """"Ii ... 

j , 'f"" , •• 1 It.at .... tlo .. d I. j'oor"riU<. I .. tl mo.~ 10 dal. <l.b .. ,. " .. d.rdlullon 

.. l! ~ . ... f .... « 10 o<Uvlli<o I~ ' ...... <l: •• I,rio, ' 0 ~ .. ,,,, •• , of P.I,. 111-96, Co. )'0' 

rl""".p ••• 'Id • • d~I,I"".1 ~ ... ;,~. h.w ,~ ...... 'lvl,; ..... lIilt ,h • • hJ_I ..... nflM •• ..,' ''"' of 

Ibe , "~ pl .... rOt m«ll. £ ".'.'0'1' "DIfIID .. ? Abo, pleo ......... lb. lOU' I ............ . 

wl<b ~, om..,ofM ... ,.ut •• 1 ud lI ~<1 .. d"' h .. ... «I ... l ."".cl .... ,~i ." .••. 

s..:tinn 21(1.1 ofP.1... 112-96. ooD<eming <1m o:ochonge >I&n~ for 'mptO""" 

inletupenbilily. toiluireo. to tho"ll<I! p<lI<ll .. ~1e IhoIIbe ~ incurparale ...-i .. ,o, 

"",,_notary rtondartlr, oudr .. Ill< oXl<Il>iblo M .. kItp lII1~"agc. (XMl.). 

Od'v<. '"1 •• 11<.,,,, of P.L, 111·96. (/It ()qo;>tUJla1I WU' pn>vo>nenl or dOh '~.""""" 

Nn<br(j; .... "",""" RIOOsly odv<><&l<d 110< ... of"",," .... _ 1"""""lop .. lIII <fa .. ""~ 

.. 1I!Id.tttIS 10<11>< d<""lopmonl .,flT . ,..""'" lI.I('p<Jrtinl<nti<.1l UI functiono. fOt ..... UIIT 

"lOd.....,>tiQo .m.n._ Tba;o ',.;'"dod: 

• 
175 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.094

\ , li!1ho fY2009 ond FV ZOII >olic; ......... vrhkhpro....scd pI.< forIWC""""",," 

.frans daimOod '" 0.. 'eopono<-IO _I -. ETA reqllimd!hat tho. t<cluIology lOCI'" 

OeYdope<IoMuld .... <>PC" IOUK, ~ '" <l'Io "''''''I feasible, be ItanSf<nIIlo .... 

be .... Iabl,. 10 be 011 .... <1<1 by mullirlc ... , ... orklO .... ogm:;" wi_I"'" n«d 10 

oIgnifi<m~y '''''\Omi •• IM.y.torn '" be haole<! in "" ..... 111>1 will PfOyido IlUlo,,,,ltd 

~ 10 other II ..... 11><: rool .. b mliltipl ...... 10 <bar< """"""" .ystml>ltoolf 

lIPI 00<011""""'" """~ ".~ •• in&.idu.ll ... edJ. 

1. In FY 2005, '" ,e.luor: imprnpor pa)'III<IIU bo< ..... of III< I""t of ... _. <Ird lifnely 

clainlon' ><pan'i,,", info"",'''I<,,n Ivailable '" ....... , tho ~ r.c!lllOltd Ibo 

imJol<mtn1lliM oflb, Stile W"",,",llo. DolO fuchaos< S)""'" (SIDES) . ... """"".",d 

.... pIoycr ... ponsc .)'1, .... b"""" bycmplo)'m ond lhircI-p.vIy IdOl,ltr_1OtI (!"P .... ,'" 

.w.la:diI. Ibe coUt«i"" OfinfOll,,"I'OIl "" ""~I,,y .. oqw-allnni. "Thi.~ ..... _the 

XMt FonruI fOf Ihi. Inf""".'ion "'o:IIan9< ""'..-em tho ...... o1Id ....,ploy .... 

1. 1b<: Dq>anm",' r .. ili ... "" ond P""i6ed fundi", f". \IIc,,,,, .. ,.';"n nf IIaI.I "«h>nIo formal. tiun fulrndod Binary Coded Dccirnall"letChangc CG<k (EBCflIC) 10 XML f'" 

tho lnI ... tatc c."",,,,,tlo. Netw<rt (ICON} •• m"~ tek.:onunoni<lIlioru 

....... -0:\: INI ""pportIlbt IrMIIf ... of d . .. """'8 .!Aleo. EBCDIC Is a f"",,11 >POCir .... lly 

...... for moinfrules o.nd Is.." o.n i"ttropcrable I.lmIUr<L 

lco. ... """""": lnl"'!Ale B .... rll (l8~'Combl ... d Wage Oai"", (ewC); 

U"""'ploymenl 

~ 

Contpert.'litli"" FoJ.,.1 Employee [l}Cl'El wi Un<mpl<I)'n\<"IIl 

r .. Ex·S ..... i<.",.",..,...(l1CX}propnu; 

The W'lcll.""",llnll!J<haoae Sr>'''''' (WR~~) thai <nabl .. 01&1 .. to lIb";n 

wop m:ord ",f"""otion for perf""" .. "" ~: Th< Un""'PIo)"ll'mt 1nsuJan<c InquOry (UIQ) d.>Ia ",0!w1&O .,.illl u... S<xial 

S«wil)' Arlmipilltmion (SSA) tlul enoII!d II .... 1<1 .. hdot. SSN. wil/l SSA, 

... 

Th. He.lth eo .... '" To:< ~lltlCTC) lh .. on;oblco SW .... tQ "-'tIlt 

Inf ....... "'" OII.lia" "' indi~ . ... ho .... "",01"" osoi,llnO< in oov<ri:\;lo 

ponklll Qfthoi, .... 1"""'. tnwto.nct cc"'<taF 10 In_I K~ S<MCc . 

. 

~ 

~ ICON Iw """" modemiUll '" 'OK XMI.., I, <emu. .... '" .100 _ .... tho EBCOIC fwmal far >tats tlw "'ye be<:to unobI.1u c.o",~ ... thoo, 

fI\lId<miIOlion d~ru. The Dq>AnmcoI i> p"""!inal><lCeUlfl' !tel"""1 ~ 1<1 

<uppotI tho """.ilion uf.w .. "' ..... OIand.lnIiutl XML •• ehange rorm"". 

Tho Dtp>rtment i, in I"0\im!n>ty ill ....... .,... witi:llho Omoe of M"" I1""""t ond OOllgtlllll<i 

lb. ~I ofl!.,.)1/1 and H"",.. S.m.: ... .. "",11 .. willi _ 1\" ..... Inform...", 

TocbnololY Supp<m C .. " ... <I!l<flltd ~y lb. NaOOnaI ~oIion or Slot. W",Hart<. A!«1Ci ... 

'" .. pll>fe tho I ...... r,,"IM opf>O!lunitl .. RIo" .,JWti_1 doto •• chulgc ..... <lonlIt.Itlioo "lCI"na -"" 
176 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.095

Ik~ .. r" Pa)""", (.',,",,01 \III'C) i. Ihe "'''1'<"10101 0""" .urie,' U"""'rl")'"",,,,, 1"""",,,,;< (UI) pm """ \1\111 i'i "'"P'l".lbl. fo/ ""''''''' ''''' """ """nto.in;"Ill'"o~, IY ~fll .. , projlroon tI~ull&h 

I>""'~'"''''''' dOl«I,,,,,, i""<>Iiw";':',,, .".bli,h"",nl, .nIl ""'''''<1)' "n,"I""P<t JIll''''''''''' Tho 

[we "",1< al,., pq>on: ""''<lI nor 11''''''''''''''''_ 'mi. "OiL' 10 ".,rfOl11l(([ ., 11>.0 SlI<l. ""~I t>y .,.10 

at.fT 10 one", III<' ("n"wing .. ""i'""'......, 

Sottl"" lO1(~I}MII .. S;,c:1>I s..:"rilY I"~ (SSA) ",!~i"~ ll'ot.l o """'·IUI 10" j~ uJo ~ """'i,,,,,, ~,t: ' S""b """hI..t. of.doni"","""'" ...... ~ 1" ... 1 by 1110 5«",,,,,), 10 I><' 

"",_obI) ,,"1o" "le~ 10 in'''I'' ,,,n l") .K'III"r """"'I'lo),m •• ' oOll,,,,""'li,,,, "hm ~III:. " 

Soclion ll))(lI)(S J ~rll .. $SA .bu ~";,<. thOi • "lOW low ineh!d< 1'''''';'io" r<»". ''£,pend,lu .. ",f.1I ""'''''Y " ,'Mn",," rr"", an "IIOmrioyn>tnl lund of • ...,h .101<; ,n U .. 

f"') ,,"on' or """"P'kl) """" <oOlpoO .. ,iQO .... • 

"11<' 5e<:mory or Uo.IM- 1".- .~<d Ihoo. t\'\k.,..II." PAil';""" .. 1"1;<1'''' wi,,, w" 

ptII"";,,n' of5l><1 ... ' JlO6(h) and JJQ.l( ~4) ot'tlIO I .... rut R~,....,. CoJe. In I'." V. 

'SocIi"" 7.lflO. Erur~'!.!l.$<.f\·'m!tlDo .. l, S«,.,ory'. SIEIIIiliInJ 10. F ... ,.) "'., 

I "''''I''I)'n'''''' ,,, fe<[!I'r< tlllt ........ \.;I,,' In<l ud~ prlwWnrl$ r. .. uclt met"'""" yf 

otl'nin;~lnlliyn":I« _ wilhin ", • ..,." .ok~'.",d: 

To dc:""" b<1",n .. J>4!d lIIruugh .""" t>y tile 1Ig<""Y Of ~"'>\II:JI ",nf"' mi""'l'n:"mt.,,,,,, or t1ft)f b) the <totm.nl !>r olher>. 

TO <10:1 .. d"(Mftl, r,,"" \.I:t\loinina.l><""nb IhroUih "illr~1 m;'",~n' .. it>rr. 

T~ ",,,,,,'.r t>eno:nl< ",."",Id u~ ·, .. ".in oi"""""""C':~ 

l [>< <l.,,"!! mu'" lklId ill< doi"..,,,, [;""," '0 101'"l" 1«1)01"", ,ho, " .. '" """'; .. «1 in,prorooly 4nd 

W<e""""tI" • .oklO "",,,,·.rimf'rlll"'r "")"""""ll'"yn, ... , 'O<'f!lU1\' • ..,i,,). St"" ""j" "oj,' .... "-1'''Jm<nl' fur n(ln·fnl\ld ffiiCfJ'Oy",,-,nt> "'hi" il "QIlIJ he "gill'" ''<l"h~ ilJkl $oo.l <<InKiOO<C' f<l"U""' 10 I' .. i, """ • • 1." , 1'11< In(li ..... "'~ b) ,\l,,,,,, r", '=v",i''II.<W'''''I '''''n'~ IlIO' r",,,, 

"01. '0 ""~, U<\ov. il. lis! nF-"Omt ofll", '_"'''''''1)' oot!l"iljc; .nIl l\IOb 1\.«<1 h~ $Ioleo: 

off",,. f,,'m ..... r, .. 

ffrr .. ,. f,,'m ,,,,,o ... d red."" i .... '''''" I .. ",r",.r. OlT..,,, r""" [,.,ory ",;"ninllS, '."ocs'",,' . , .n,J'lion, nn.l ,,(lwr "., .... r'r< nd"" n~ ,i>< 

IIIMi(o MI",,,,,,, Refo"" 

'nltrslillO n'C(J\WI "¥...,n"'ls 

U0p"I'mO," rl'IM 

(I,il ",,!10m i,..hklin~ W!li:C ~om;<Itm<nt. and I>'''l'''rty h.n! ~lJr 'nocin~, , .. II«llun a~"""i ... onJ ,,,>Ii, btin.'OU" 

['"","It Qr\<l b.n~"'[H0~ 

R~r"rrollO omO" "nn!"".,,,, (koef. [ .,,.,. y~", 4 ... c"f""",o'<"I\I 'R"nd .. 

;1/II,,:md r '-"1<011 f1R'j>,."<ul;oo 
177 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.096

• t •• 'lbli,'""."" "r,n!c'fdi and ""nolliOSI>TlIQ 'W"""'~ "~" "hi.h oil.!,"" ;""Cnl,.. '''Il10) qul.kIY. 

On J.n""", 2~ , 20, I. ,he "'~"I.'w",. r .... lhe offi<, oITo<Io,.IIa. ,.:rUM rIO)""''''''' III <-..lI.s:1 ."",,,t>I'»,OI"" in""""",,, «""l'<"""'li<>ll (UIC) d.1;u Jut ", f""" or. ptl)OO', r.ilufO 10 "'pon 

""minp,,~ publi.b.:d. n., i)op;nIll'OfII """" .. 1 <i ..... I) wilh lho Tn.. ",,'Y L><;>Mrnc.n." 

r<'''',ik "'eM' ..... 1 ,"i<!:lnc, I<> the ~"'I<$ 10, Ih .. impl"nwnwion urn,. Tn.· .. ,.". OIT""I Pn.>w'''' 

(TOPi. Si"". It>: i .. opIiM or lhe UIC o.hI I1"'JIIII'" WLth lOP. S 119.l ","liM 01 O"'1'I-)"nl".1> 

'" no I>«-n .""",,,,,"(1 \hfl'4\:h , hoo,. 100.000 olT ..... ,..,.inSl I'...,J,.· .. I ..... ",fUM p;l)·menl,S. ,,, I>r 

M"",h ~. 10 12. 9 .w" .. 1\0,'" j,tIfll,,",,",I<J It.: TUt' :md ~,.I ,,\hot ""'<> "'" In dilTem" ~'" 

or, ... lng and in'1'IMlfI\tIl.lkm. 

W"'"n imi!"J!lO' p.1.)'"",n.,,,,,, n.w,"",d II .. )· .... "'1",.".,j II> ,II< ... ,,,,,' UI 1111<1 fur>d_""llI~ 

fn,m ,,~i<h '''''Y we .. pIliJ. su.".r< ,",,",milO n:pot\~\mJ"\O>fI~on"""'1"'O.,1'tK"!l1 ""locli,,"."<1 "''''OJ}' ""Ii"i,(c,,,,, It.: f:"",IO)'"IOnl and l .. inin~ Mmini''' ........ (1.·TAI217 "pOII_ Tho 

inf,~""li<Io' "'I""",d "" tbc I., A U7 '"T"l~ is b;L<ed on .,,, ... 1 , ..... "" Qf UI O''''fIOl"","nl$ 

1.lo..,lillo.l or.J n., .. ",.m.! by III< "al. ogone"" Ror., 10"' ......... "'I"ln on .. .,. 1.,'01 ",..,,, .. ri .. «" .~Io!Ido. J'.", 2011 l:""",~ r. lJl r«<l"",>, wi. i ..... , .''''Loblo 00 ''''' o.,PO""I<1II". UI 

In,I'fI'J'I<O' PlI.)ln,"u!>'''''bt>o.i:< (hl," J.'""" "'~'S!ll' d'!/!llI "J1 i~", him\. '10'. plan to p'-'kloJl, 

,,><~'O() <Lot> ". I'" '''''''~~~' " . .'> :!Oll 
178 

f 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.097
179 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.098

QUestions for ItJe Record from Rep, McDermott to The Honorable 

Jane Oates 

Hearing on Moving from Unemployment Checks to 

Paychecks : Implementing Recent Reforms 

April 25, 2012 

Ways and Mean s Subcommittee on Human Resources 
180 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.099

Quc$liHn: Whm is already bc~ng dOne un \le r FedcmllJw tt) r"garding 

Slaws' QUISHmding. ndvanccs (IOiInsl~ 

Answer: Un\lcr [lCmllmCnl f.edcrnI13\\'. lldV3nCCS stlltes receive l() pay 

unemployment comp.:nS31ion begin to accrue i'ltCf\,'S1 alier a pcriQ{! Of 

lime. As you know, the Americon Recovery lind Rcinvcstmcnt Act of 

2009 waived interest aecmal and payment On these advances for tWO 

years. When th:lt ended, advances ocganlO occrI,Ie inlcft'St and the first 

intcrest puymcnt was \luc by September 30, 2012. The amount ofinl"rc:;t 

ench state paid is in the table on the next r age. In addit iOn, permanent 

Fcdcr31 Inw includes 3 mechanism 10 help S1.Utc.s repay the prin~ipul or 

these IIdvancc.s, Typically, employers in a state receive a 5.4°4credit 

nguinst the full Federal Unemrloymcnl TII)( Act (rUT A) tax. Ilowcvcr. 

ir statt:s nnve outstanding ndvances for II sp~e ified period of lime, Ihm 

credil begins to he rcdncl!d. r he first year ofrcduction, empluyef$ plly 

un additional 0.3% FUrA ta. ... wilh the reduction generally increasing iii 

0.3% increments in u.c~cding yenrs. Thcs~ IIdditional FUTA pll)'melilS 

are used to pay down the prineiPlll nrthe stlllC'S l\d\'IIllCCS. Information 

about the I·UrA credit reductions IIpplienble in I"'aeh of the S1mI"'$ is in 

the table un the lust puge. 
181 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.100

'!'ho n", 101,<(1.«1 I"Y!1lOn' "" .~' alk"C' (I",,,,,) w •• ~ .. OIl s. .... ""'b<r 111. 201 I. Th" ~"l<>IOnl ,oj 

i,"""., .t.>I"'I .. 1 r,~ 1'1""" "t'''' (pY)2tI1 1 i,I",NlI><""'. 

'" 'I II 
182 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.101

Actual and Potential FUTA Cl'$dll RQduc\1ons (Tax In c' ....... ) 

to.Repay ~v~Cf>J, 

(P y~1>!e on. S7,OOO la ~ab'" wage b<ne) 

• These /&105 assume each SlalestiH "", sloan balance on Novembat 10, 2012, aM nOSla\e 

~ua4i l8S "" an 3~di!ionalled<X:!ion nd~, FUTA, SUc110n 3302(c), woida!lOl! und&r 

Seclkln 3302(g) til cap under Sec[1on 3302(1) 

•• AL dod nolivve • loan bllaoca on 11110111 

... MI dod not !'ave a loan baianat0l'1111112 

•••• SC Qualir.ed 'til ;woida'>ce lot 2011 

C'ed~ 

Red~ ,,. 

6~ ". 

Costp .... 

57,000 Wo!~er 

'" ,0> 

'" "Of!, HITA ".dr, <MO'''''''' ..... tl.lI~ ..... ~ ,. "',_~ !IIIA , .. ~, ' '''' ............... 1" . <1o,. p;\~. 

~ ••• itIo<>oI ...... n .. p.Id.~ u ... 10'0'/ l>I'~ 1111 .... .,. ><1_ • • Ito.",I, 
183 

f 

[Public Submissions for the Record follows:] 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.102
184 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.103

TIlUE BLUE 

ST,\TK.\IENT FOR TIn: RECORD 

Or 

JO,\ SI A S. M ONitOr. 

VICE P\{K~HJr.NT, Dr.rUTV C£SI'.RAL CDUNst •• 

MOm Cl lrEr CO)II'LIANCE OH' ICF.R 

TRUER'.lIr .• INC. 

FOR TIU: I-tR.\IHSG 0 ,'" 

"MOVING FROl\'1 UNEMPLOYMENT CUECKS TO PAYCUECKS: 

IMPLEMENTING RECENT REFORMS" 

BEFORE 

TilE U.S. IIOI/SEor REI'RF..sf;sTATIV£S 

Cc)~I~l ITr F.t 0 ;" W" \'S ANI) M.:,..I'·S 

SUflCOMMln"u : 0 ,-( H UMAN R [SOIlRCr.S 

AI'IUL25.2012 

IOlj A Sireet Ta~(/l1Ia. \V/I 98402 

253.383.9101 • jn'olln'H:Qi,lnlcblucillc.com 
185 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.104

Clla;rm"" Duv(s. Ranking M~(nbcr Do~eu, and nlelnbo.'rS "r!he Ho"SC WUy$ ""d M".UlS 

Hun,"" Re~ul'Ce. Sul>cnmmincc. Ihank you forthc ol'l',,"unily 10 ,,,Im"l this sl:Ilemem fnr the 

recI,rd nil bchulf"fTrwcBlu<:. Il\~. r· TrucBlue~J. We applnud Ih.: C()mmiuc<: and Su~onll1\iuL-e 

for Ih~ir Oll~llIinn and wnr~ on Ih~ <,(Iieal is:>uenfuncmplnynwnl and. in particular, on policies 

designe<J!O promote I1.'t."mplnymcm. 

Our noliO<! ~nntin"~. 1" l/.r~ pplc ",,110 Ih,' &Ialltd economic recovery and ""rs;sl~nl 

IIncmploym~nt. As rdonns orc cOll5idcrctl 10 "n~mploymcnl insur.oncc, we .\Iroll!;ly urge 

Congress 10 consider opportunities 10 ".<pand lemporary employment, whiCh eao ploy I 

sij!nificam rol ... ;n irn;"',;)Si" ~ recmployn",n!. 

TlIllF. Rl UE 

TrueRI"c is. lud;ng~upplicr oflempor',yy ... ·"r~. I" 1011. TrucBh,e l."tJ{Inl.-c'I.-d 

"l'pro.<;m3Iciy )011.000 people 10 work, pa~ing nearly SI\OO million in wages and ",rving nl"..ny 

150,0Il0 busine->,;es in Ih~ scrvice. retail. wholesale. man"fa~t"ring. tranSp.lft31ion. and 

l"fl""troc(ion induslries. TnwAl~ Glso cmploy5 2.5(1(J r .. sulnr hca!lquuftcr nnd hnlnch smlT. 

TrucAluc provides 1~"111por~ry blue cQII~r and s~ilkd .... or~ lhruullh fivc Iinl'S ofbusilll'"SS: 

Labor Read)'; SpartKn Staffing; eLI' Rl"SOun:~"S: Plane Tech.: and C,,",erlinc. n,,, Trud.ll"" 

family ufcompanies is wn"nin~-d to provJding ind;vid"al~ with opJ>011lmilics lOr gmwth and 

CUIIO"1= wllh the h~lp !hoy need 10 ucreed in !OOny's compel;,;\"e ~nvil"9ll"1"nt. 

TDII'OItAIU' \\'011)': 

Tcnlpof"Jry C11lplo)mrnl p!ay~ ~ crilkal role in Ihe I.'i:Onolny by providmg ~mp oymcm 

fluibilily for workers and businesses. Tempomry staffing r.rm~ employ more !han 10 million 

pWplc eacl' ycar. Thl'SC job!; ofTer millions of p..'<Jplc Ihe upp.lrtun'ly IU w<.".\':, p~rlicu arJ y"s the 

e'C<momy ctmlinue.; it.. Ir~gilc recovery. 

T~mpOrnry emplO}'Mm is mliChI Iu mitiga!ing unemployml"1lt. while otTering ~ 

~igniflcam U!lJX)nunilY 1(1 r.ud pl'nnancm employmcm through 1,.",pt>r:lry JOM. TemPQnlry 

ell}ploymelllaiso p"wid"-S people w;!h on.!he-jub lrui"in.!;. nlto""in!; !hem!o karn new s\.:ills and 

c~fl-'nd Ihdr knowledge ""<e, which cnn lal." he lransferrcd In oth.". empj,,)"~.~ ""d 

~I"""b'\ht,,~d. 

At Ihe Silmc lim~, I~mporary ,.",p!oymcnt provides businCSSC"!o .... ilh the opponunil~ \0 

upp"n "'" uppl~"'c"ltheir .... orkf=.., in Vl(riom; work situations, such as employee abstncc~. 

skill h,,"a~I' s, sc~,onal worklo.1ds, 3nd .pec;al aS~ignnlCnl ~ ill" p"'ji.":IS. Moreover. in the 

currcllt ce<)"om~. t~mp.1rary employment is leading Ihc johsn'\:ovcry by allowing cmplpycn; 10 

S~"gf ,,"~incs~ and economic conditions bo:f.:m: ro"'millj~g 10 p<mlanfnl hi",s. 

In Truelllue'~ e.~p<:rie~cc. the awmge len"", of. temporary employe"" i~ al'pro~imalely 

ooc monlh ~ yen. Ho,,·,·\er. c\,'n ifsumcunc .... "rJ.:s for II> for ,,,, .. day. Ihn. pcrMln IS an 

empllly..- oflhe cnmp.aoy !"\I!nel' Innn an indl"T"'ndcnl C()OIT:1tlOr. f.mploy~ ~lalUl< Inl"g"'I'-"; 

WOrJ.:l'l"S inlo lhl' U.S. econumy. ensuring Ihm Ihey ~'" ciigible 1(1 .... ork in Ihe U.S .. thai ~Il 
186 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.105

work~"'f tompens:llion. un~'flIployml'1l\. and ;m'orne taxt'l! - as well as any coun-()rJ~red 

~amishmcn\li; are wilhheld alld cull~t~d. and that W_2s rcl'QM inculne nocuratcly. 

CO.\! Ht:"!;!) CO.'1 rl ~~"'T 'I; I' H()(;!IA.\I 

~5 I.' 

For manyofthc IIncm!)I~ ed. t~mll"r.lry sl~Jlil1g ~gcncic§ arc un in ~gr.llll"n uftheir jot> 

St'arch, E"fn in tl)day'i tough ""'momy. Truelllll<' is experiencing. a 5h()t1 i'.~ of qualified 

individuals SI."Ckin~ tL1Ufl(m1O' clnl,luymJ,:lll. Thecurr~llt un"mrlu~m~'Ut ;nsur:1nce system. in 

ccrt:lin in~la"CeS. creatc~ a disinccllti'-e fur indi,·idual. "ho """,i\"c uncm!)loyJllent insunoncc to 

w{)( ~ in B tClnl"""'r)'jub, whid, ~oul,1 "" .... ,. as a ,q'l.-~mil 'nlcrvk .... nnd )l\Jssibly leM tl! 

pcrnlUl\Cnl placement. 

The foll()Win~ exampic pruvidC.\ au [liustrat;ot\. Let's:;ay Ibut an indivi dua l. whl) 

prcv;ou,I~,. held a jub as 3 ca'l"'llIcr. is IIOW ullempluyed "nd ",cciw" 5350 PC' week in 

unemployment insurnnec. If~hc ~ocs 10 a branch nfB lem)ll'mry stnning agency and applies as 

pa.M cfll", "'l:juirrojoi! ~arcll. ~hc is 01l~ 1l inoemiv;2w I" (urn d"",n 3n oil ..... for. (empo.my 

job bo.·(·.,use ~h~ is likely to lo,;e her un~mploymi<Jll in;;lIJ'lHJC~ .ndrorshe may I'a: .. i\'c- moR' 

money by culkocling un~mpl"ymcn! ;nsunmc~. 111i~ keeps h~ ... from "cc~p! in g ajob (hat m~) 

(cBch her new ~kills II! (ho\ could lead I<l BllolTerofpem,anent employmenL. 

PrlJl/(J$ul 

One o!)lion fllr ~dd",ssing this issue Is 10 ~~Iablish a "Comblnt:tl Compens.:Jtion f'mllJllm" 

("Pmgmm"). The Pmgrnm "nuld mudify the incenlive SlruclU,,' .~fthe Uncmllloymclll insurnnccsyst~m by ~ncU\lrnl:inli: individu~l~ (0 acn')l\ tempurJry or Se:ls.ooal o:mpl"ymm! while 

rnainlltini"ll l!i~ir e li);ibi!;ly tl! rem;,;" 1)11 uncmploymenl insurance. 

Under thc !'rogram. an indl"idunl "hll acccpled a lemporary 0' seasonal joo wl'uld 

cominue 10 be eligible 10 =eive IInemplcymenl inSUrDIlCe. hut at a n"duced amount Th~ 

reduced unemployment in ~lIrJnc<· paym~"f11 \!'Qllld{'Qmp<!J<'nlf llul iml/l'i</""lj()J·,h .. gol' bct,wc • .'n 

their caminlls and their Slanda.d uncn)ploymcnt insurnnce paymcnl$. plus an additiunal incenli..., 

am!>unl. 

For t~ample. assume that an indi\'idual a(X~'?!td a !~-mfl(m1ryor seasonal job thUI paid 

SH5 p". wC'Ck. In ord.,.. (0 [mnpt~l'fll{e for h~r luwer w«kly .,.. mingslshc n.'eci,-ed S3Sf) on 

uncmploym~nt in.urancc\ and pffl\'ide an .ddi!ional ;ncen(i, ~ tu work. unemployment ifL<urn n~.., 

I'o!'luld pay a Hal ptrccm~llc Mller slandoml uneHlpio),mcm iu;.,Ij""JnN pltynl~nl. FM <·~~nlilk. If 

the un~mploym .. m inSlInlllce paymenl p<'fC~ntnge wus 20 I"'rcem. ~he would =eiv~ an 

ull~mploymcnt insurJIlCc paym(~110f$ 0 P'" 'H"CL. brin~;n~ the IUlal recci, ~d tu S395 per "e(·k. 

The 1''''gIUm "l)uld hB,·e a numix:rofbcner,l$. First. Ih~ unemploy.:d individ'~11 i. back 

at w()fL. Second. usin.;'!;~cs lhal n", llllable I() hire filii-time wnrLen; du~ to fiuctuating demand 

can still ,,'TOW the cCl)flom~ and provide job<; through lem(lQnu')' empluyment. Third. lhe 

govcmlncnl bcn~r,ts a~ uncmpluymcm in~u,,"'ce payl\l~nlS pr{Jvid~'d 10 Ih ~ individuals w()uld 

Il<: ri:duced. In Ihe ~ample above. thearnoont Ilfun'::",pICymcnt insurancc payment. aJe 

- J -
187 

Æ 


wwoods2 on DSK499XVN1PROD with WAYS & MEANSInsert 78665A.106